Borrowing costs on student loans for the next academic year will likely be near a 15-year high.
In the 2025-26 school term, the interest rate on undergraduate student debt is expected to be 6.39%, based off Tuesday’s 10-year US Treasury auction. The formula for calculating each year’s rate is typically to take the yield from the May auction and add 2.05 percentage points.
The upcoming rate is down slightly from last year’s rate of 6.53%, but still among the highest levels since the Great Recession. The borrowing rate is capped at 8.25% by federal law.
Elevated borrowing costs for new student loans are set to further squeeze those grappling with the hefty price tag for a college education in the US. Many families earn too much to qualify for financial aid but too little to cover tuition out of pocket.
It’s also coming at the time when President Donald Trump’s administration is ushering in new changes that will affect student loan borrowers. In recent months, Trump has announced plans to shutter the Department of Education and shift the management of its $1.6 trillion student loan portfolio to the Small Business Administration.
The executive branch also restarted collections for defaulted student loans on May 5, formally ending an era of leniency for borrowers. Those who don’t make payments can now be subjected to wage garnishment and the withholding of social security benefits.
