New student loan interest rates for the William D. Ford Direct Student Loan become effective each year on July 1. The new rates that became effective for loans disbursed on or after July 1 of 2016 are approximately one half percent lower than last year's rates.
The new rates are fixed for the life of the loan and closer to rates offered for private student loans offered by some lending institutions. In recent years, parents had begun to borrow from banks and credit unions to take advantage of rates that had been lower than government student loans.
Subsidized Loans: 3.76% -a drop from the prior year rate of 4.29%
Un-subsidized Loans: 3.76%- a drop from the prior year rate of 4.29%
Grad Plus Loans: 5.31%- a drop from the prior year rate of 5.87%
Parent Plus Loans: 6.31%- a drop from the prior year rate of 6.84%
The interest rate drop this year, takes student loan interest rates closer to 2013 rate levels. The William T. Ford Direct Student Loan replaced the Federal Family Education Loan Program in 2010 when the US Government became the lender for federal student loans. At that time, the role of private banks in the federal loan arena changed from lending to loan servicing. Since that time, private lenders have improved private loan alternatives and offer a variety of attractive loan options for parents and graduate students.