From Pinnacle Wealth Planning Services —

After two years of decreases, interest rates on federal student loans are set to increase almost a full percentage point for the 2021-2022 school year.

The interest rates on federal student loans are reset each year after the May auction of the 10-year Treasury note.

The rates apply to new federal student loans issued on or after July 1, 2021, through June 30, 2022. The interest rate is fixed for the life of the loan.

See the table below for the details of the increase.

Federal student loans: Subsidized vs. Unsubsidized

What’s the difference between a Subsidized and Unsubsidized Federal Student Loan? It’s who pays the interest while the student is in school and the loan is accruing

With subsidized loans, the federal government pays the interest that accrues while the borrower is in school, during the six-month grace period after graduation, and during any loan deferment periods.

With unsubsidized loans, the borrower is responsible for paying the interest during these periods.

Only undergraduate students are eligible for subsidized loans, and eligibility is based on demonstrated financial need.

Find more information about Federal Student Loans at




New rate 2021-22 Old rate 2020-21  Available to  Borrowing limits  

Direct Loans:


Undergraduate    Students


(Subsidized and Unsubsidized)

3.73% 2.75%

Undergraduate students only


Subsidized loans are based on financial need as determined by the Free Application for Federal Student Aid (FAFSA);

unsubsidized loans are available to anyone and are not based on financial need

For dependent undergraduates:


1st year: $5,500 (max $3,500 subsidized)


2nd year: $6,500 (max $4,500 subsidized)


3rd, 4th, 5th year: $7,500 (max

$5,500 subsidized)


Max: $31,000 (max $23,000 subsidized)


Direct Loans:


Graduate and Professional Students


(Unsubsidized only)

5.28% 4.30%

Graduate or professional students only


All students are eligible regardless of financial need

$20,500 per year; max $138,500

Direct PLUS Loans:


Parents and Graduate Students

6.28% 5.30%

Parents of dependent undergraduate students and graduate or professional


Total cost of education, minus any other aid received by student or parent
  (Unsubsidized only)        

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