2025 Student Loan Interest Rates Near 50-Year Highs
If you’re heading to college this fall, be prepared to pay a lot more, and it’s not just rising tuition. The new federal student loan interest rates for 2025–2026 will likely come with some of the highest interest rates in decades. While the latest rates will likely dip slightly from last year’s peak, they will still likely be among the most expensive federal student loans since the Great Recession and nearly on par with interest levels last seen in the inflation-ridden 1980s. The consequence for student loan borrowers would be that borrowing for school will be far more expensive than just a few years ago.
Key Projected Student Loan Interest Rates for 2025–2026
- Undergraduate loans: 6.39%
- Graduate loans: 7.94%
- PLUS loans (parents and grad students): 8.94%
These rates would be only slightly below last year’s peak, which hit the highest levels since the Great Recession. These rates apply for loans disbursed between July 1, 2025, and June 30, 2026.
Why Student Loan Rates Are Staying High In 2025
Federal student loan interest rates are set each May based on the 10-year Treasury yield plus a fixed margin. The rates above were estimated by student loan expert Mark Kantrowitz and reported by multiple outlets. This year’s auction yielded around 4.34%, which would put undergrad loans at around 6.39%, more than double the pandemic low of 2.75% in 2020.
That matters because even though inflation is slowing, the Federal Reserve hasn’t started cutting interest rates yet. Until that happens, borrowing costs, including student loans, will stay elevated. “Interest rates have not changed by much from last year to this year,” Kantrowitz told Bankrate. “The stability in the interest rates can be attributed to the Federal Reserve Board’s decision to pause interest rate cuts due to concerns over inflation and unemployment rates,” he added.
How Today’s Student Loan Interest Rates Compare To The Past
Back in 2020, students were locking in loans at 2.75%. Today, it’s more than double that. Here’s how the current rates compare historically:
Year Undergrad Loan Rate
- 2020 2.75% (pandemic low)
- 2008 6.8% (pre-financial crisis peak)
- 1980s ~8–10% (inflation era)
- 2025 6.39% (estimate)
But here’s the kicker: college was significantly cheaper in the 1980s.
In 1980, public college tuition averaged about $1,000/year, roughly $3,500 to $4,000 in today’s dollars. At private colleges, it was around $4,000 (about $14,000–$16,000 now). Today? In-state public tuition averages over $10,000, and private colleges top $42,000.
So even if interest rates are similar to those in the 1980s, the amount students borrow has exploded, which means the interest burden is far heavier.
What These Federal Rates Mean For 2025 Borrower
Let’s say you take out $5,500, the maximum federal loan for a dependent first-year student. At 6.39%, you would rack up nearly $1,800 in interest over 10 years. If the rate were still 2.75%, you’d pay less than $1,000 in interest. Multiply that across four years and possibly graduate school, and it’s thousands of dollars in extra cost, just from interest.
Student Loan System In Turmoil As Rates Stay High
It’s not just persistently high interest rates; the entire student loan system is in flux, including.
- Former President Joe Biden’s SAVE plan is being blocked: A court injunction has SAVE in limbo. Moreover, SAVE is also being written out by the draft GOP student loan plan.
- House Republicans are pushing a new Repayment Assistance Plan that could require 30 years of repayment and dramatically raise monthly payments. The draft proposal doesn’t index to inflation and currently has a benefits cliff, which means that a $1 raise could spike student loan payments by $1,000.
- Public Service Loan Forgiveness is under political scrutiny with potential changes to eligibility.
- Technical glitches and changing rules are frustrating borrowers trying to plan.
Borrowers are navigating rising payments, stalled forgiveness options, and a generation’s most expensive federal loan rates.
How To Navigate High Student Loan Rates In 2025
- Only borrow what you truly need
- Pay interest while in school if you can
- Know your repayment options, especially if SAVE or RAP could affect your future payments
- Watch for potential refinancing opportunities if rates fall, but don’t jump too early and lose federal protections
The Upshot: Why Student Loan Interest Rates Matter More Than Ever
Federal student loan interest rates may not sound like breaking news until you realize they can cost thousands of dollars over a decade. The new 2025–2026 rates will likely be among the highest in the past 40 years, and students today are borrowing far more than their parents ever did.
That combination makes this year’s loans especially expensive. The new student loan interest rates should also remind every borrower to be strategic about how much you borrow, when, and how you plan to pay it back.
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