Federal student loan interest rates are scheduled to go down effective with loans disbursed on or after July 1, 2016.
The rates on undergraduate Direct Loans will drop from 4.29 percent to 3.76 percent for the 2016-17 academic year. Graduate Direct Loan rates will be 5.31, lower than the current rate of 5.84 percent. The rate on PLUS loans, both parent loans for dependent undergraduates and those for graduate borrowers, will drop from 6.84 to 6.31 percent.
Loan rates are fixed at the time the loan is disbursed to student or parent and will not fluctuate with the changing annual loan rates. Loan fees are also adjusted by the federal government each year on October 1.
Student loan interest rates are tied to the 10-year Treasury note, a process which started in 2015-16. The government may not raise rates above 8.25 for undergraduate loans, 9.5 percent for graduate loans and 10.5 percent for parent PLUS loans.
For more information about federal loans, see the “Aid Types” > Loan Types navigation above and select the page for the specific type of federal loan type for more information. If you have any questions about your financial aid at U-M, contact or visit our office during regular business hours.