Projected New Rates at a Glance
| Loan Type | 2025-2026 Rate | 2026-2027 Rate (Projected) |
|---|---|---|
| Direct Subsidized & Unsubsidized Loans (Undergrad) | 6.39% | 6.52% |
| Direct Unsubsidized Loans (Graduate) | 7.94% | 8.07% |
| Parent PLUS | 8.94% | 9.07% |
These rates are fixed for the life of each loan disbursed during the 2026-27 year. They apply to every borrower equally. Your credit score, income, and financial history have zero impact on your federal rate. That is one of the fundamental differences between federal and private student loans.
The projected rates outlined are based on the May 12, 2026, auction of the 10-Year Treasury Note, plus a fixed margin set by Congress (2.05% for undergrad, 3.60% for grad, 4.60% for Parent PLUS). The U.S. Department of Education typically publishes official rates in the Federal Register by late May or early June.
What Changed from Last Year (and Why)
The 10-year Treasury yield came in at 4.47%, up from last year’s 4.342%. This reflects ongoing market expectations for inflation and Federal Reserve policy. For borrowers, it means every dollar borrowed in federal student loans this year costs more in interest than it would have last year.
To put the new rates in context, here is what undergrad borrowers have paid over the last five years:
| Academic Year | Undergrad Rate |
|---|---|
| 2022-23 | 4.99% |
| 2023-24 | 5.50% |
| 2024-25 | 6.53% |
| 2025-26 | 6.39% |
| 2026-27 (projected) | 6.52% |
Federal vs. Private: The Rate Comparison That Actually Matters
Federal rates apply to everyone equally. Private rates are personalized based on your credit profile (or your cosigner’s). That is why the comparison between federal and private rates is only meaningful when you know what private rate you personally qualify for.
That said, here is the general landscape:
| Borrower Type | 2026-2027 Federal Rate | Private Rates from Credit Unions* |
|---|---|---|
| Undergraduate | 6.52% | as low as 2.99% |
| Graduate | 8.07% | as low as 2.99% |
| Parent | 9.07% (plus origination fees) | Coming Soon |
*Private rates are shown for fixed-rate loans with strong credit or qualified cosigner. Variable rates may start lower. Check your personalized rates with our credit union lenders.
For undergraduate borrowers with a parent or family member willing to cosign, private rates can be meaningfully lower than the federal rate. The difference is especially notable for families whose creditworthiness would qualify them for rates in the low-to-mid 4% range. On a $10,000 loan with standard repayment over 10 years, the difference between 6.52% federal and 4.25% private fixed rate is roughly $1,345 in total interest savings.
For graduate borrowers, the gap is even wider. Federal Direct Unsubsidized grad rates at 8.07% are well above what many creditworthy grad students or professionals can get through private lenders. If your fixed vs. variable rate decision leans fixed, private fixed rates in the mid-4% range represent significant savings over federal.
Parent PLUS is where the math gets most dramatic. At 9.07% federal, plus a 4.228% origination fee, the effective cost of a Parent PLUS loan is among the most expensive ways to borrow for education. Private parent loans start meaningfully lower for families with good credit.
Three Borrowing Scenarios for the 2026-27 School Year
Scenario 1: Mostly federal. You qualify for the maximum in federal Direct loans ($5,500 for freshmen, up to $7,500 for juniors/seniors), and your family’s contribution covers the rest. At these rates, borrowing federal makes sense for the standard amounts because you get access to income-driven repayment, deferment options, and potential forgiveness programs. The rate premium compared to private is the price of that safety net, and for many borrowers, it is worth paying.
Scenario 2: Federal plus private to fill the gap. Your total cost of attendance is $35,000. Federal loans cover $5,500. Scholarships and savings cover $15,000. That leaves a $14,500 gap. You take the federal loans at 6.52% for the protections they offer, and you fill the remaining gap with a private student loan at whatever rate you qualify for. This is the most common approach and it is usually the smartest one. You get federal protections on the base amount and a potentially lower rate on the gap funding.
If your gap is significant and you have access to a strong cosigner, compare private rates before assuming federal is always cheaper. In many cases, a cosigned private loan at 4.25% costs less than borrowing additional federal at 6.52%.
Scenario 3: Mostly private. This applies to a smaller group: borrowers (or cosigners) with excellent credit who qualify for rates meaningfully below federal, who do not anticipate needing income-driven repayment or federal forgiveness, and who want the lowest total cost of borrowing. It also applies to some graduate and professional students who can access private rates well below the federal grad rate, especially post-OBBB as Grad PLUS is eliminated for new borrowers.
None of these scenarios is universally right. The correct mix depends on your rate, your risk tolerance, and your career outlook. What we’d recommend: see what private rate you may qualify for (soft pull, no impact on your credit score), then compare it against the federal rate for your loan type. That comparison gives you the data to make the right call.
What This Means for Parent PLUS Borrowers
Parent PLUS deserves its own section because the economics are particularly stark at current rates.
A Parent PLUS loan at 9.07% with a 4.228% origination fee means you’re paying an effective rate above of 13.298% from day one. On a $20,000 Parent PLUS loan (the new annual cap under OBBB), you will pay approximately $845 in origination fees before a single interest charge accrues.
Compare that to a private parent loan in the 4.5% to 6% range with no origination fee (most private lenders don’t charge one), and the cost difference over a 10-year repayment is substantial.
The trade-off is real: Parent PLUS offers access to ICR (income-contingent repayment) through consolidation, plus potential PSLF eligibility if the parent works for a qualifying employer. Private parent loans don’t offer income-driven options. For parents with stable income and strong credit, the private option is typically cheaper. For parents who need the flexibility of income-driven payments, the federal safety net may justify the higher cost.
Our Parent PLUS alternatives guide covers the full decision framework, including strategies for the new $20,000 annual cap.
Action Items by Borrower Type
Incoming freshmen and their parents: You have your award letter and you know your gap. Accept the federal Direct loan first. If there is still a gap, get a private rate quote before accepting Parent PLUS. The comparison takes five minutes and could save you thousands.
Rising sophomores, juniors, and seniors: Your federal loan limits increase each year ($6,500 sophomore, $7,500 junior/senior). If you borrowed privately last year at a higher rate than you’d qualify for now, some lenders allow refinancing of existing private student loans while you’re still in school (though most require you to be in repayment). Focus on minimizing new borrowing.
Graduate and professional students: Post-OBBB, Grad PLUS is gone for new borrowers. Your federal option is Direct Unsubsidized at 8.07%, with an annual limit of $20,500 (or up to $40,500 for certain health programs). That limit won’t cover full cost of attendance at most professional programs. Private student loans for graduate programs are now a core part of the funding plan, not a supplement.
Parents: The new $20,000 annual Parent PLUS cap means you may need to split funding between federal and private. Check the federal rate (9.07% + origination fee) against private parent loan rates. If your credit is strong, the private option is likely cheaper for any amount above the cap.
The Bottom Line on 2026-27 Rates
Federal student loan rates are what they are. You cannot negotiate them, shop for them, or improve them with better credit. They are set once per year by a Treasury auction, and they apply equally to every borrower.
What you can control is how much you borrow at that rate versus at a private rate that might be lower. For many families, the answer is a combination: federal for the base amount (safety net, flexibility, forgiveness options) and private to fill any remaining gap at a competitive rate.
The data point you need is your personal private rate. Check it with a single soft pull across multiple credit union lenders. No commitment, no impact on your credit score. That one number tells you whether federal, private, or a mix is the right call for your family.
