| |
|
Federal student loan rates for 2025-2026 halt upward trend
Interest rates on federal student loans for the 2025-2026 school year will decrease slightly, after four straight years of increases. |
|
Interest Rates on Federal Student Loans Drop Slightly for 2025-2026
Every May, interest rates on federal student loans are reset for the upcoming school year. The rates are calculated by combining the yield on the 10-year U.S. Treasury note with an additional fixed amount set by Congress.
Based on this calculation, interest rates on federal student loans are set to decrease slightly for the 2025-2026 school year, halting four straight years of increases. (Last year's interest rate for undergraduate Direct Loans hit a decade high, while rates for graduate Direct Loans and PLUS Loans hit their highest levels in more than 20 years.) The 2025-2026 interest rates apply to new federal student loans issued July 1, 2025, through June 30, 2026. The rate is fixed for the life of the loan.
| |
2025-2026 |
2024-2025 |
Available to |
Borrowing limits |
Undergraduate Direct Loans
(Subsidized and Unsubsidized) |
6.39% |
6.53% |
Undergraduate students only
Subsidized loans: require financial need as determined by the FAFSA (Free Application for Federal Student Aid)
Unsubsidized loans: available to any student, regardless of financial need |
For dependent undergraduates:
1st year: $5,500 (max $3,500 subsidized)
2nd year: $6,500 (max $4,500 subsidized)
3rd, 4th, 5th year: $7,500 (max $5,500 subsidized)
Max: $31,000 (max $23,000 subsidized) |
Graduate Direct Loans
(Unsubsidized only) |
7.94% |
8.08% |
Graduate and professional students
All students are eligible, regardless of financial need |
$20,500 per year (max $138,500) |
PLUS Loans
Parents and Graduate Students
(Unsubsidized only) |
8.94% |
9.08% |
Parents of dependent undergraduate students and graduate and professional students |
Total cost of education, minus any other aid received by student or parent |
Note: With a subsidized loan, the federal government pays the interest that accrues while the student is in school, during the six-month grace period after graduation, and during any authorized deferment periods, so no interest accrues for the borrower during those times.
With an unsubsidized loan, the borrower is responsible for paying the interest that accrues during these periods. If a borrower does not make payments on the accrued interest while in school, it will be added to the principal balance of the loan after graduation, a process called capitalization.
Borrowers in default face new collection efforts
In April, the Department of Education announced that it would resume collections on defaulted federal student loans starting in May, after halting collection efforts for more than five years since the start of the pandemic. The new policy applies to the roughly five million borrowers who are currently in default (those who have not made a monthly loan payment in over 360 days) and the four million borrowers who are close to default.
Before official collection efforts start, borrowers should receive email communications from the Office of Federal Student Aid (FSA) encouraging them to start making payments, enroll in an income-driven repayment plan, or sign up for loan rehabilitation. Subsequently, borrowers in default (whether student or parent) who are unable to make payments after "sufficient notice and opportunity" will be referred to a federal debt collection service and subject to involuntary collection efforts, including wage garnishment (automatic deductions from a borrower's paycheck). The FSA office expects to send required notices to borrowers about wage garnishment later this summer. Borrowers in default and borrowers who are delinquent on their student loans (missing a payment for 90 days or more) also risk a negative impact to their credit score, which can make it harder to obtain a credit card, get a car or home loan, or rent an apartment.
Sources: Edvisors, May 8, 2025; U.S. Department of Education, 2025 |
|
|
|
The material presented includes information and opinions provided by a party not related to Thrivent. It has been obtained from sources deemed reliable; but no independent verification has been made, nor is its accuracy or completeness guaranteed. The opinions expressed may not necessarily represent those of Thrivent or its affiliates. They are provided solely for information purposes and are not to be construed as solicitations or offers to buy or sell any products, securities or services. Thrivent and its affiliates accept no liability for loss or damage of any kind arising from the use of this information. Concepts presented are intended for educational purposes. This information should not be considered investment advice or a recommendation of any particular security, strategy, or product. The concepts in this presentation are intended for educational purposes only. They may not be suitable for your client’s particular situation. The suitability of any specific product or strategy will be dependent upon your clients’ particular situation.
Hypothetical example is for illustrative purposes. May not be representative of actual results. Past performance is not necessarily indicative of future results.
Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.
Thrivent financial advisors and professionals have general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.
Thrivent is the marketing name for Thrivent Financial for Lutherans. Insurance products issued by Thrivent. Not available in all states. Securities and investment advisory services offered through Thrivent Investment Management Inc., a registered investment adviser, member FINRA and SIPC, and a subsidiary of Thrivent. Licensed agent/producer of Thrivent. Registered representative of Thrivent Investment Management, Inc. Thrivent.com/disclosures.
Insurance products, securities and investment advisory services are provided by appropriately appointed and licensed financial advisors and professionals. Only individuals who are financial advisors are credentialed to provide investment advisory services. Visit Thrivent.com or FINRA’s Broker Check for more information about our financial advisors.
A licensed insurance agent/producer may contact you and financial solutions, including insurance may be solicited.
Certified Financial Planner Board of Standards Inc. (CPF Board) owns the CFP® certification mark (with plaque design) logo in the United States, which it authorized use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements. 3172761.4 |
Prepared by Broadridge Advisor Solutions Copyright 2025.
To opt-out of future emails, please click here. |
|
|
