Student Loan Interest Rates Repayment and Student Loan Release Policy in USA [ Updated for 2023 ]

The Federal Direct Loan Program sets student loan interest rates on an annual basis and the rate assigned at disbursement is fixed for the life of the loan. Interest rates are fixed by the US Department of Education based on a rate formula that uses the “high yield of the 10 year Treasury Bill rate sold at the prior to June 1 plus factor (add-ins) points”.

Categories on Student Loan Interest Rates

Loan Type Undergraduate Subsidized/Unsubsidized Loans

Rate Formula T-bill + 2.05%

Cap 8.25%

Loan Type Graduate Unsubsidized Loans

Rate Formula T-bill +3.60%

Cap 9.50%

Loan Type PLUS Loans (Graduate and Parent)

Rate Formula T-bill + 4.60%

Cap 10.50%

Chart I for 3 Types for Available Student Loan Interest

Chart I- Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans disbursed on or after July 1, 2020 and before July 1, 2021.

Loan type	Borrower type	10-Year treasury note high yield (%)	Add-on (%)	Maximum rate (%)	Fixed Interest rate (%)
Direct Subsidized Loans, Direct Unsubsidized Loans	Undergraduate students	0.7	2.05	8.25	2.75
Direct Unsubsidized loans	Graduate and professional students	0.7	3.60	9.50	4.30
Direct PLUS loans	Parents of dependent undergraduate students, Graduate and professional students	0.7	4.60	10.50	5.30

Chart II of the Student Loan Interest Rates

Chart 2—Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct Plus Loans First Disbursed on or After 07/01/2013 and Before 07/01/2021

On/after	Before	Direct Subsidized Loans; Direct Unsubsidized Loans (undergraduate students)	Direct Unsubsidized Loans (graduate or professional students)	Direct PLUS Loans
07/01/2020 07/01/2019 07/01/2018 07/01/2017 07/01/2016 07/01/2015 07/01/2014 07/01/2013	07/01/2021 07/01/2020 07/01/2019 07/01/2018 07/01/2017 07/01/2016 07/01/2015 07/01/2014	2.75 4.53 5.05 4.45 3.76 4.29 4.66 3.86	4.30 6.08 6.60 6.00 5.31 5.84 6.21 5.41	5.30 7.08 7.60 7.00 6.31 6.84 7.21 6.41

What is the difference between Direct Subsidized Loans and Direct Unsubsidized Loans?

Direct Subsidized Loans and student loan interest rates are available to undergraduate students with financial need and Direct Unsubsidized Loans are available to undergraduate and graduate students; there is no requirement to demonstrate financial need.

In case of borrowing Direct Subsidized loan and student loan interest rates, your school determines the amount you can borrow, and the amount may not exceed your financial need. But in case of borrowing Direct Unsubsidized Loan, Your school determines the amount you can borrow based on your cost of attendance and other financial aid you receive.

Payment of Interest on DU Loans

The U.S. Department of Education does not charge interest on a Direct Subsidized Loan [ student loan interest rates = 0% ] while you’re in school at least half-time, during your grace period, during deferment periods and during certain periods of repayment under the Income-Based Repayment plan. They charge interest on a direct subsidized loan during all other periods (starting on the day after your grace period ends) including forbearance periods.

You are responsible for paying the interest on a Direct Unsubsidized Loan during all periods. If you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, they will add it to the unpaid principal amount of your loan. That is called Capitalization. Capitalization increases the unpaid principal of your loan and interest will be charged on the increased capital amount.

Note- You will receive a six month grace period on repayment of each Direct Subsidized Loan and Direct Unsubsidized Loan that you receive. Your six month grace period begins the day after you stop attending school or drop below half-time enrollment.

Student Loan Repayment Incentive Programs

Repayment Incentive Programs encourage you to repay your loan on time because, under a repayment incentive program, the charge of interest rate on your loan may be reduced. There are two repayment Incentive Programs are mentioned below. The Direct Loan Servicing Centre can provide you with more information about their repayment Incentive Programs

Student Loan Interest Rates Reduction for Electronic Debit Account Repayment

Under the Electronic Debit Account (EDA) repayment program, your bank automatically deducts your monthly loan payment from your checking or savings account and sends it to lender. You receive 0.25% interest rate reduction while you repay under the EDA option. For any further information, contact Direct Loan Servicing Centre.

Up-front Interest Rebate

The rebate is equal to a percentage of the loan amount that you borrow. This is the same amount that would result if the interest rate on your loan were lowered by a specific percentage, but you receive the rebate up-front.

You will lose the up-front Interest Rebate if you do not make all of your first 12 required monthly payments on time. “On time” means each payment must be received no later than 6 days after the due date.

Repaying Options for Direct Loan Borrowers

You may choose one of the following repayment options to repay your loan:

Standard Repayment Plan

Eligible loans- Federal Direct Subsidized and Federal Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans and all Federal PLUS Loans.

Under this plan, minimum monthly payment is $50 and you have to repay your loan in full within 10 years (not including periods of deferment or forbearance). This plan results in the highest monthly payment but least total finance charges.

(within 10 to 30 years for Consolidation Loans).

Graduated Repayment Plan

Eligible loans: Federal Direct Subsidized and Federal Direct Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans and all Federal PLUS Loans.

student loan interest rate for usa student

Under this plan, your payment will be lower initially and increase every two years during repayment. Loan term is 10 years (not including periods of deferment or forbearance). Initial payments are lower than the standard plan but payments may increase dramatically over the ten years to pay off the amount borrowed.

(within 10 to 30 years for Consolidation Loans).

Extended Repayment Plan

Eligible Loans: Federal Direct Subsidized and Federal Direct Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans and all Federal PLUS Loans.

Under this scheme, you may choose to make fixed monthly payments or graduated monthly payments that start out lower and gradually increase over time.

Repay your loan in full within 25 years (not including periods of deferment or forbearance). If you make fixed monthly payments, monthly payments must be at least $50. you must have borrowed at least $30,000 to be eligible for this option.

Income Contingent Repayment Plan

Eligible loans: Federal Direct Subsidized and Federal Direct Unsubsidized Loans, Federal Direct PLUS Loans made to the students and Federal Direct Consolidation Loans.

Under this plan, repayment amount will be based on borrower’s income, family size and the total amount of your Direct Loans. Repayment will extend as far as 25 years and if you do not repay your loan after 25 years, the unpaid portion Wil be forgiven. You may have to pay income tax on any amount forgiven. Your monthly payments will be lower than the 10-year standard plan monthly payments.

Income-Based Repayment Plan

Eligible loans: Federal Direct Subsidized and Federal Direct Unsubsidized Loans, Subsidized and Unsubsidized Federal Stafford Loans, all Federal PLUS Loans made to the students and Consolidation Loans (Direct or FFEL) that do not include Direct or FFEL PLUS loans made to parents.

The required monthly payment will be caped according to the borrower’s income. Your monthly payment amount may be adjusted annually. You’ll have up to 25 years to repay your loans. Your monthly payments will be lower than the 10-year standard plan monthly payments. If you have not repaid your loan in full after making the equivalent of 25 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven.

Student Loan Interest Rates

You may have to pay income tax on any amount that is forgiven.

Revised Pay As You Earn Repayment Plan (REPAYE)

Any Direct Loan borrower with an eligible loan type may choose this plan.

Your monthly payments will be 10 percent of discretionary income.

Payments are recalculated each year and are based on your updated income and family size.

Loan Consolidation

A direct consolidation loan program allows you to consolidate one or more of your eligible federal Education loans into one loan. Your monthly payment could be lower due to consolidation if you reduce your interest rate, make your repayment timeline longer, or both. Once the consolidation is complete, you will have a single monthly payment on the new Direct Consolidation Loan instead of multiple monthly payments on the loans you consolidated.

Contact the Direct Loan Servicing Centre for more information about loan consolidation.

Other than interest, is there a charge for this loan?

loan Fee on All Direct Subsidized Loans and Direct Unsubsidized Loans

Yes, there is a loan fee on all Direct Subsidized Loans and Direct Unsubsidized Loans. The loan fee is a percentage of the loan amount and is proportionately deducted from each loan disbursement.

The percentage varies depending on when the loan is first disbursed, as shown in the chart below.

Loan Fees for Direct Subsidized Loans and Direct Unsubsidized Loans

First Disbursement Rate	Loan Fee
On or after Oct. 1, 2019, and before Oct. 1, 2020	1.059%
On or after Oct. 1, 2020, and before Oct. 1, 2021	1.057%

Visit “My Aid” to view information about all of the federal student loans and other financial aid you have received and to find contact information for the loan servicer for your loans.