Electronic Announcement ID DL-22-04 Subject Interest Rates for Direct Loans First Disbursed Between July 1, 2022 and June 30, 2023 Direct Subsidized Loans,
Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after July 1, 2013 have fixed interest rates that are determined in accordance with formulas specified in sections 455(b)(8)(A) through (C) of the Higher Education Act of 1965, as amended (HEA). The interest rate is determined annually for all loans first disbursed during any 12-month period beginning on July 1 and ending on June 30, and is equal to the high yield of the 10-year Treasury notes auctioned at the final
auction held before June 1 of that 12-month period, plus a statutory add-on percentage that varies depending on the loan type and, for Direct Unsubsidized Loans, whether the loan was made to an undergraduate or graduate student. Loans first disbursed during different 12-month periods may have different interest rates, but the rate determined for any loan is a fixed interest rate for the life of the loan. For each loan type, the calculated interest rate may not exceed a maximum rate
specified in the HEA. The maximum interest rates are 8.25% for Direct Subsidized Loans and Direct Unsubsidized Loans made to undergraduate students, 9.50% for Direct Unsubsidized Loans made to graduate and professional students, and 10.50% for Direct PLUS Loans made to parents of dependent undergraduate students or to graduate or professional students. On May 11, 2022, the Treasury Department held a 10-year Treasury note auction that resulted in a high yield of 2.943%. The chart
below shows the interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after July 1, 2022 and before July 1, 2023. Interest Rates for Direct Subsidized Loans,
Loan Type 10-Year Add-On Fixed Interest Direct 2.943% 2.05% 4.99% Direct 2.943% 3.60% 6.54% Direct PLUS 2.943% 4.60% 7.54% Thank you for your continued support of the Federal student assistance programs. Last Modified: 06/27/2022 After you graduate, leave school, or drop below half-time enrollment, you will begin a one-time six month grace period before repayment begins. Interest does not accrue on Direct Subsidized Loans disbursed after July 1, 2014 during the grace period. Your federal loan servicer will notify you of the date your loan repayment begins and will provide further details about making payments. If you have a Direct Unsubsidized Loan, you have the option to pay interest while you are in school, or you can wait until you are no longer enrolled. Our office recommends that you pay the interest to minimize your loan debt. If you do not pay the interest, it will capitalize and be added to your total repayment amount. The example below illustrates the benefits of paying the interest while you are in school. With Interest Capitalization Without Interest Capitalization Original Loan Balance $10,000 $10,000 Capitalized Interest $4,800 $0.00 * Current Loan Balance $14,800 $10,000 Interest Rate 6.8 percent Maximum Term 120 months Fixed Repayment Amount for 119 months $170.32 $115 Fixed Repayment Amount for 1 month $169.09 $114.24 Total Repayment Interest $5,637.17 $3,808.76* Total Repayment Amount $20,437.17 $13,808.76 * Making loan interest payments benefits borrowers in the long run. For example, in this comparison, the monthly installment is $55.24 less and the total repayment at the end of the life of the loan is a savings of $1,828.41 in interest. Review your NSLDS record by logging into studentaid.gov. You can review information about: When you have submitted your graduation date in LionPATH, or cease to be enrolled at Penn State, you will be selected for Federal Loan Exit Counseling. No holds will appear on your record, but you will be sent a series of three email reminders to complete the counseling at
studentaid.gov. Exit Counseling provides important information to prepare you to repay your federal student loan(s). If you have received a Direct Subsidized, Unsubsidized or PLUS loan under the Direct Loan Program or the FFEL Program, you must complete exit counseling each time you: You will be able to choose a repayment plan that meets your needs. The amount you pay and the length of time to repay your loans will vary depending on the repayment plan you choose. Typical loan repayment terms are 10 to 25 years. Review the Student Loan Repayment on the Federal Student Aid site. The
Student Loans online repay tool will guide you to your best repayment option. Do Unsubsidized loans accrue interest immediately?Another type of federal loan is an unsubsidized loan. With a federal unsubsidized loan, you are responsible for the interest from the moment the loan money is disbursed into your account. There's no help on the interest; you're responsible for the whole amount.
How often does interest accrue on unsubsidized loans?Most student loans accrue interest daily and compound either daily or monthly. Daily accrual means that lenders will divide the APR by 365 and apply that daily interest rate to your principal balance each day.
Does Student Loan interest start immediately?Understand capitalized interest on a student loan
Interest starts to accrue (grow) from the day your loan is disbursed (sent to you or your school). At certain points in time—when your separation or grace period ends, or at the end of forbearance or deferment—your Unpaid Interest may capitalize.
How long does it take to get interest on a student loan?Interest is usually added to your balance when your grace period ends or at the end of a deferment or forbearance. But because of new COVID-19 relief, interest won't be added during the relief period in most cases. Your interest will capitalize only if you consolidate your federal student loans.
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