Interest Rates on Federal Student Loans Decrease to Record Lows for 2020-2021

 

This year marks the second year in a row that we will see a drop on interest rates for federal student loans, for the 2020-2021 academic year. This year's decrease brings rates to record lows. The rates apply to new federal student loans made on or after July 1, 2020, through June 30, 2021. These interest rates are fixed for the life of the loan.

One thing to note is the difference between subsidized and unsubsidized student loans.

With Subsidized loans, the federal government pays accruing interest while the student is in school, during the six-month grace period after graduation and for the duration of any loan deferment periods. Only undergraduate students are eligible for subsidized loans. Eligibility is based on demonstrated financial need.

With unsubsidized loans on the other hand, the borrower is responsible for the interest during those periods.

Direct Loans:   Undergraduates (Subsidized) -  

2.75% - New Rate

4.53% - Old Rate

Available to:

Undergraduate students only

Subsidized loans are based on financial need as determined by the federal aid application (FAFSA) 

Borrowing Limits:  

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)

Direct Loans: Undergraduates (Unsubsidized) -

2.75% - New Rate   

4.53% - Old Rate  

Available to: 

Undergraduate students only; all students are eligible regardless of financial need

Borrowing Limits:

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) 

Direct Loans:   Graduate or Professional Students 

4.30% - New Rate   

6.08% - Old Rate   

Available to:

Graduate or professional students only; all students are eligible regardless of financial need

Unsubsidized loans only

Borrowing Limits:

$20,500 per year; max $138,500

Direct PLUS Loans:   

Parents and Graduate Students -   

5.30% - New Rate   

7.08% - Old Rate

Available to:   

Parents of dependent undergraduate students and graduate or professional students   

Unsubsidized loans only   

Borrowing Limits:

Total cost of education, minus any other aid received by student or parent   

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