Student loan costs just got steeper for 42 million Americans

College is about to get more expensive for every family that plans to borrow federal money next year. Interest rates on undergraduate, graduate, and parent loans are all projected to rise for the 2026-2027 academic year, tacking additional costs onto degrees that already strain household budgets.

More than 42 million Americans currently hold federal student loans, according to CNBC, and the collective balance of outstanding federal education debt exceeds $1.6 trillion. The increases coincide with the elimination of several affordable repayment options under new federal legislation.

The new rates are not yet official, but the formula behind them is already set. One leading higher education finance analyst has done the math, offering borrowers an early look at what to expect this fall.

Mark Kantrowitz projects undergraduate loan rates will reach 6.52%

Federal direct undergraduate loan rates could climb to 6.52% in the 2026-27 academic year, up from the current 6.39%, higher education expert Mark Kantrowitz estimated in an exclusive analysis provided to CNBC. The new rates would apply to all federal education loans disbursed between July 1, 2026, and June 30, 2027.

Graduate students would face an even steeper increase, with unsubsidized loan rates projected to land at 8.07%, compared with the current 7.94%, Kantrowitz found, as Benzinga reported. Parent PLUS loans, which consistently carry the highest interest rate of any federal student loan category, could reach 9.07%, up from the current 8.94%.

Kantrowitz based his calculations on the Treasury Department’s announced high-yield rate of 4.468% from the May 12, 2026, auction of the 10-year Treasury Note, MarketScreener noted. That auction result is the key input in the formula Congress uses to calculate federal student loan rates each year, and it effectively locks in the direction of rates for the entire upcoming academic cycle.

How all 3 federal student loan rates compare year over year

The projected increases are modest in percentage terms but carry a meaningful impact over the full life of a loan. Under a standard 10-year repayment plan, borrowing $10,000 at the projected undergraduate rate of 6.52% would result in a monthly payment of approximately $113.64, Kantrowitz estimated, as Benzinga indicated.

Projected 2026-27 federal student loan rates vs. current ratesDirect undergraduate loans: Projected at 6.52% for 2026-27, up from 6.39% in the current 2025-26 academic year.Direct unsubsidized graduate loans: Projected at 8.07%, up from 7.94% in the current year, according to the analysis shared with CNBC.Parent PLUS loans: Projected at 9.07%, up from 8.94%, the highest rate among all federal education loan categories, Kantrowitz told Benzinga.

Over a full 10-year repayment term, even a fraction of a percentage point adds hundreds of dollars to the total amount a borrower pays.

For graduate students and parents borrowing at rates above 8% and 9%, respectively, the cumulative interest cost over the life of the loan becomes a significant portion of the total repayment obligation.

Federal student loan rates are rising again, increasing long-term repayment costs and adding hundreds more in interest for borrowers nationwide.

Mirjana Pusicic/Getty Images

How the federal government sets student loan rates each year

The federal government resets interest rates on its education loans once a year using a formula established by Congress. The rates are tied in part to the May auction of the 10-year Treasury Note, and they remain in effect for all loans disbursed from July 1 through June 30 of the following year, CNBC reported.

The Department of Education has not yet officially revealed the new rates, and it remains unclear exactly when that announcement will come. However, the Treasury auction result that drives the calculation is already public, which is how Kantrowitz was able to produce his projections using the established formula.

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Kantrowitz has frequently cited the rule of thumb that every dollar borrowed in student loans typically costs about two dollars by the time the debt is fully repaid, Bankrate confirmed. That rule of thumb underscores how even low rate increases compound into substantially larger total repayment amounts over a standard 10-year loan term.

Congress established separate formulas for each federal loan category, which is why undergraduate, graduate, and Parent PLUS loans always carry different rates, even though they are all tied to the same Treasury auction. 

Why existing federal loan holders will not see their rates change

Most federal student loan rates are fixed, which means the interest rate assigned when your loan was first disbursed stays the same for the entire life of that loan. Borrowers who already hold federal loans from previous academic years will not see any change to their current rates as a result of this projected increase, CNBC reported.

For families taking out Parent PLUS loans for multiple children, Institute of Student Loan Advisors founder Betsy Mayotte also suggested splitting loans up between parents, PBS noted.

Families already on income-driven repayment plans for Parent PLUS loans should consider splitting up future loans between parents for additional college-bound children.

When existing loans are in one parent’s name, it makes sense for the other parent to take out the new loans, Mayotte told PBS. This way, “at least it doesn’t ‘infect’ the older loans.”

Families also cannot attempt to borrow ahead of the rate increase to lock in the current lower rates, because federal education loans are tied directly to the academic year in which they are disbursed. A loan taken out for the 2025-26 academic year carries that year’s rate, regardless of when the borrower signs the promissory note.

Private education loans operate under entirely different pricing structures and are typically based on factors such as the borrower’s creditworthiness and whether they can secure a co-signer, the report noted. Private loan rates are often higher than federal rates and can vary significantly from one lender to another.

Rate hikes arrive as federal repayment options shrink for borrowers

The rate increases are set to take effect at the same time the One Big Beautiful Bill Act eliminates several affordable student loan repayment plans and other relief options for financially struggling borrowers, CNBC reported. That combination of higher borrowing costs and fewer repayment alternatives creates a tighter financial squeeze for millions of families.

“Total student loan debt at graduation should be less than the borrower’s annual starting salary,” bestselling author Kantrowitz advised as a widely cited guideline for borrowing. With rates climbing and repayment flexibility narrowing, staying within that threshold is becoming harder for students who rely heavily on loans to cover tuition, room and board, and related expenses.

All federal education loans issued on or after July 1, 2026, will be subject to the new rates once the Department of Education makes its official announcement. For the 42 million Americans already carrying federal student debt and the new wave of borrowers heading to campus this fall, the cost of financing higher education just moved in the wrong direction.

Related: Class of 2026 grads walk into a harsher student loan system

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