The interest rate on an unsubsidized student loan first disbursed between July 1, 2025 and June 30, 2026 is 6.39% for undergraduates and 7.94% for graduate and professional students.1Federal Student Aid. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026 Both rates are fixed and locked for the life of the loan, and they apply to every borrower regardless of credit history or financial need. Because these loans are unsubsidized, interest starts adding up the day the school receives your money, not when you graduate.
The 2025–2026 Rates
For Direct Unsubsidized Loans first disbursed on or after July 1, 2025, and before July 1, 2026:
- Undergraduate students: 6.39%
- Graduate and professional students: 7.94%
Both rates dropped slightly from the previous year. In 2024–2025, undergraduates paid 6.53% and graduate borrowers paid 8.08%.2Federal Student Aid. Interest Rates for Direct Loans First Disbursed Between July 1, 2024 and June 30, 2025
Once your loan is disbursed, the rate never changes. Market swings in later years don’t touch it. But if you borrow again in a different academic year, that new loan gets whatever rate is in effect at the time. Multi-year borrowers usually end up with a stack of loans at different fixed rates, each tied to its own disbursement window.
How the Rate Is Set
Federal student loan rates aren’t priced by lenders or based on your credit. They follow a formula written into the Higher Education Act. Each spring, the Department of Education takes the high yield from the 10-year Treasury note auctioned before June 1 and adds a fixed margin that depends on the loan type:3Office of the Law Revision Counsel. 20 USC 1087e – Terms and Conditions of Loans
- Undergraduate Subsidized and Unsubsidized Loans: Treasury yield + 2.05%
- Graduate and Professional Unsubsidized Loans: Treasury yield + 3.60%
- Direct PLUS Loans: Treasury yield + 4.60%
The May 2025 auction produced a 10-year Treasury yield of 4.342%, which is how the current 6.39% and 7.94% rates were calculated.1Federal Student Aid. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026
Statutory Caps
Federal law also sets absolute ceilings that unsubsidized rates cannot exceed, no matter what Treasury yields do:3Office of the Law Revision Counsel. 20 USC 1087e – Terms and Conditions of Loans
- Undergraduate Unsubsidized Loans: 8.25%
- Graduate Unsubsidized Loans: 9.50%
- Direct PLUS Loans: 10.50%
Only an act of Congress can change these caps. The current undergraduate rate sits well below its ceiling, so there is room for rates to rise in future years before the cap kicks in.
When Interest Starts and How It Grows
Interest on an unsubsidized loan accrues daily from the moment the school receives your funds. It keeps accruing while you’re enrolled, during the six-month grace period after you leave school, and during any deferment or forbearance.4Federal Student Aid. Unsubsidized Loan The daily amount is your current principal balance times the interest rate, divided by 365.25.5Edfinancial Services. Payments, Interest, and Fees
On a $10,000 balance at 6.39%, that works out to about $1.75 per day. Over a four-year degree with no payments, more than $2,500 of interest piles up before repayment even begins.
Capitalization
If you don’t pay the interest as it accrues, it can eventually get added to your principal in a process called capitalization. From that point forward, you’re paying interest on the larger balance, which raises the total cost of the loan.
As of July 1, 2023, the Department of Education stopped capitalizing interest in several situations where it previously did, including when you enter repayment, exit a forbearance, or leave most income-driven repayment plans. Capitalization still happens where statute specifically requires it, such as when you leave the Income-Based Repayment plan. Paying even small amounts toward accruing interest while you’re in school keeps your balance from growing beyond what you originally borrowed.
Origination Fee Reduces What You Actually Receive
Every Direct Unsubsidized Loan carries an origination fee deducted from your disbursement before the money reaches the school. For loans first disbursed between October 1, 2020, and October 1, 2026, that fee is 1.057%.6Federal Student Aid. FY 26 Sequester-Required Changes to the Title IV Student Aid Programs Borrow $10,000 and about $9,894 lands at your school, but interest still accrues on the full $10,000.
Direct PLUS Loans carry a much steeper 4.228% origination fee over the same period, along with a higher 8.94% rate for 2025–2026.6Federal Student Aid. FY 26 Sequester-Required Changes to the Title IV Student Aid Programs Graduate borrowers generally save money by exhausting Unsubsidized Loan eligibility before turning to PLUS.
The Student Loan Interest Deduction
You can deduct up to $2,500 per year in student loan interest paid on your federal tax return, including interest on Unsubsidized Loans. The deduction is taken as an adjustment to gross income, so you don’t need to itemize to claim it.7Internal Revenue Service. Publication 970 – Tax Benefits for Education
The deduction phases out at higher incomes. For the 2025 tax year, single filers with modified adjusted gross income between $85,000 and $100,000 get a partial deduction, and those at or above $100,000 get none. For joint filers, the phase-out runs from $170,000 to $200,000.7Internal Revenue Service. Publication 970 – Tax Benefits for Education These thresholds are adjusted for inflation, so check the current year’s IRS guidance when you file.