Interest rates are established each year for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans for which the first disbursement is on or after July 1 through the following June 30. The rate is the sum of a uniform “index rate” plus an “add-on” that varies depending on the type of loan and whether the borrower is an undergraduate or a graduate/professional student.  Under the new provision, interest rates are the same for Direct Subsidized Loans and Direct Unsubsidized Loans taken out by undergraduate students, with a different rate for Direct Unsubsidized Loans taken out by a graduate/professional student and for PLUS Loans taken out by parent borrowers or graduate/professional student borrowers.

Under the law, the index rate is determined each year as the “high yield of the 10-year Treasury note” auctioned at the final auction held prior to the June 1 preceding the July 1 of the year for which the rate will be effective, plus a statutorily defined “add-on”.  As noted, the add-on differs depending on the type of loan and the student’s grade level. Each loan type is also subject to a maximum interest rate (or cap).

The interest rate for a loan, once established, applies for the life of the loan – that is, the loan is a fixed-rate loan.

On Tuesday, May 7, 2014, the Treasury Department held a 10-year Treasury note auction that resulted in a high yield of 2.612%.  The chart below displays the resultant interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after July 1, 2014 and before July 1, 2015.

Undergraduate Direct Student Loans

• Subsidized-4.66%
• Unsubsidized-4.66%

Graduate Direct Student Loans

• Unsubsidized-6.21%
• Graduate PLUS-7.21%

Parent Direct Loans

• Parent PLUS-7.21%

There is now a maximum eligibility period which affects Direct Subsidized Loan Eligibility for 1st time borrowers ON or AFTER July 1, 2013.There is now a limit on the maximum period of time (measured in academic years) that you can receive Direct Subsidized Loans. In general, you may not receive Direct Subsidized Loans for more than 150% of the published length of your program. This is called your “maximum eligibility period”. You can usually find the published length of any program of study in your school’s catalog.

For example, if you are enrolled in a 4-year bachelor’s degree program, the maximum period for which you can receive Direct Subsidized Loans is 6 years (150% of 4 years = 6 years). If you are enrolled in a 2-year associate degree program, the maximum period for which you can receive Direct Subsidized Loans is 3 years (150% of 2 years = 3 years).

Your maximum eligibility period is based on the published length of your current program. This means that your maximum eligibility period can change if you change programs. Also, if you receive Direct Subsidized Loans for one program and then change to another program, the Direct Subsidized Loans you received for the earlier program will generally count against your new maximum eligibility period. For additional information and examples, please review the official announcement from the US Department of Education.

Looking for information on your 1098-T? Visit the Student Accounts 1098-T webpage for more information!

Federal Student Loan Interest Rates have changed effective July 1, 2013. Interest rates on student loans are now tied to the 10-year Treasury note plus 2.05 percentage points for undergraduates, and plus 3.6 percentage points for graduate student loans. Parent and Grad PLUS loans are at plus 4.6 percentage points. These rates will vary on a yearly basis based on the legislation that was passed. The new interest rates for 2013-2014 are listed below and are subject to change for subsequent years based on variable rate increases:

Undergraduate Direct Student Loans

• Subsidized-3.86%
• Unsubsidized-3.86%

Graduate Direct Student Loans

• Unsubsidized-5.41%
• Graduate PLUS-6.41%

Parent Direct Loans

• Parent PLUS-6.41%

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