Each spring, interest rates on federal student loans are reset for new loans. For the 2018-2019 academic year, rates are set to increase by more than half a percentage point for new loans made on or after July 1, 2018:
- Direct Stafford Loans for Undergraduates (subsidized or unsubsidized) -- 5.045% (4.45% for 2017-2018)
- Direct Stafford Loans for Graduate Students (unsubsidized only) -- 6.595% (6% for 2017-2018)
- Direct PLUS Loans for Parents and Graduate Students -- 7.595% (7% for 2017-2018 )
With subsidized loans, the federal government (not the borrower) pays the interest that accrues while the student is in school, during the six-month grace period after graduation, and during any loan deferment periods. Subsidized loans are based on financial need.
Subsidized vs. unsubsidized
What's the difference? With subsidized loans, the federal government pays the interest that accrues while the student is in school, during the six-month grace period after graduation, and during any loan deferment periods. With unsubsidized loans, the borrower is responsible for paying the interest during these periods. Only undergraduate students are eligible for subsidized loans, and eligibility is based on demonstrated financial need.