New Federal Student Loan Interest Rates Announced for - Time for Congress to Step Up
The U.S. Department of Education's Federal Student Aid office has released the new interest rates for federal student loans disbursed between July 1, 2025, and June 30, 2026. As expected, rates are rising yet again, putting an even greater burden on students and families already grappling with the high cost of higher education.
Key Interest Rates for 2025–26
The interest rates are based on the 10-year Treasury note auction held on May 6, 2025, which yielded 4.342%. Federal law adds a fixed "add-on" to this base rate depending on the loan type. Here’s how it breaks down for the upcoming academic year:
Direct Subsidized & Unsubsidized Loans (Undergrads): 6.39%
Direct Unsubsidized Loans (Grad/Professional) 7.94%
Direct PLUS Loans (Parents & Grad/Professional) 8.94%
These interest rates are fixed for the life of the loan but change annually for new borrowers based on current market conditions.
Why This Matters: The High Cost of Borrowing for Education
Let’s be honest, 6.39% to 8.94% interest for federal loans is exceptionally high, especially when compared to today’s mortgage or auto loan rates. Students and families are being charged more to invest in their futures than homeowners pay to finance a house. That’s a troubling disconnect.
These rates are not arbitrary. They’re the result of a formula embedded in the Higher Education Act, which ties student loan rates to the financial markets but caps them far above reasonable limits. And those caps? Still too high:
8.25% for undergrad loans
9.50% for grad loans
10.50% for PLUS loans
The real problem is that these interest rates compound debt. They make it harder for borrowers to repay loans, delay financial independence, and suppress consumer spending; a key driver of the U.S. economy. We are, quite literally, holding back the future workforce with interest.
Call to Action: Congress Must Act
It’s time for Congress to reassess the structure of federal student loan interest rates. If the federal government can borrow at less than 5%, why are students being charged nearly 9%?
Legislative action is needed to:
Lower the maximum allowable interest rates
Decouple student loan interest from profit models
Cap interest at affordable, market-appropriate levels
Access to education should not come with lifelong debt that grows faster than it can be paid off. This is a policy choice—and it's one that Congress has the power to change.
Bottom Line
While the 2025–26 federal loan rates are now official, they serve as a reminder that the system needs reform. Higher education should be a ladder, not a trap. It’s time for Congress to ensure student loans support opportunity, not suffocate it.
