Interest on a federal Direct Unsubsidized Loan first disbursed between July 1, 2025 and June 30, 2026 is charged at a fixed 6.39% for undergraduate borrowers and 7.94% for graduate and professional students.1Federal Student Aid. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026 Both rates are locked in for the life of the loan and will not change with the market. Interest starts building the day the money reaches your school, and you are responsible for every dollar of it.
The Current Rates
For the 2025–2026 academic year:
- Undergraduate students: 6.39% fixed
- Graduate and professional students: 7.94% fixed
If you already have unsubsidized loans from earlier years, each keeps the rate it was assigned at disbursement. Loans first disbursed during 2024–2025 carry 6.53% for undergraduates and 8.08% for graduate students.2Federal Student Aid. Interest Rates for Direct Loans First Disbursed Between July 1, 2024 and June 30, 2025 Borrowing across multiple years usually means holding several loans at different rates.
When Interest Begins
Interest on an unsubsidized loan starts accruing on the disbursement date, not when you graduate or enter repayment.3Federal Student Aid. Top 4 Questions – Direct Subsidized Loans vs Direct Unsubsidized Loans That is the essential difference from a subsidized loan, where the government covers in-school interest.
You are on the hook for interest during every period the loan exists: while you are enrolled, during the six-month grace period after you leave school, and during any deferment or forbearance.4Federal Student Aid. Unsubsidized Loan Payments are not required in those periods, but unpaid interest keeps piling up and can later be added to your principal.
How the Daily Charge Is Calculated
Federal student loans use a simple daily interest method. Each day your servicer multiplies your current principal by your annual rate, then divides by 365.25:5Edfinancial Services. Payments, Interest, and Fees
(Principal × Interest Rate) ÷ 365.25 = Daily Interest
Take a $10,000 undergraduate loan at 6.39%. That works out to $639 a year, or roughly $1.75 a day. Over a 30-day month, about $52.50 in new interest is added if you pay nothing. Because the daily amount is small, even $25 or $50 a month in voluntary payments during school can noticeably slow the growth of your balance.
The Autopay Discount
Once you enter repayment, signing up for automatic payments cuts your rate by 0.25 percentage points.6Federal Student Aid. How to Prepare for Student Loan Payments A 6.39% undergraduate loan effectively becomes 6.14%. The discount applies only during active repayment, not while you are in school, in the grace period, or in deferment or forbearance.7Edfinancial Services. Auto Pay
The Origination Fee Adds to the Cost
Interest is not the only cost. Each Direct Unsubsidized Loan carries a one-time origination fee of 1.057%, taken out of the disbursement before the funds reach your school.8Federal Student Aid. FY 26 Sequester-Required Changes to the Title IV Student Aid Programs Borrow $10,000 and roughly $106 is withheld, leaving about $9,894 for the school. You still owe interest on the full $10,000 and repay the full $10,000. The fee applies to loans disbursed through at least September 30, 2026.
Capitalization: When Unpaid Interest Becomes Principal
Capitalization is the moment your accrued unpaid interest gets folded into your principal. After it happens, interest is calculated on the higher figure, so you pay interest on interest. If $1,500 in unpaid interest capitalizes on a $10,000 loan, your new principal is $11,500, and every future daily calculation starts from there.
Regulations that took effect in July 2023 removed capitalization from several triggers, including entering repayment after the grace period and coming out of forbearance. For Direct Loans held by the Department of Education, capitalization now happens in two main situations:
- After a deferment ends on an unsubsidized loan
- When you leave or lose eligibility for the Income-Based Repayment (IBR) plan, including voluntarily switching plans, missing the annual income recertification deadline, or no longer qualifying for reduced payments after recertification9Nelnet. Interest Capitalization
The cleanest way to avoid capitalization is to pay interest as it accrues. Small interest-only payments during school or deferment keep the principal from growing.
If You Are in the SAVE Forbearance
The SAVE income-driven plan was built to cover any remaining interest after your monthly payment, keeping balances from growing. Federal courts have blocked key provisions of SAVE, and enrolled borrowers have been placed in a general forbearance while the litigation continues.10Federal Student Aid. Court Actions – Federal Student Aid Interest is accruing during that forbearance, and the SAVE interest subsidy is not being applied. If you are in the SAVE forbearance and want to control interest growth, ask your servicer about switching to a different repayment plan.
What Interest Looks Like Over the Life of the Loan
Total interest depends on how much you borrow, your rate, and how long you take to repay. A dependent undergraduate who borrows the full $27,000 aggregate cap over four years at 6.39% and pays it back on the standard 10-year plan will pay roughly $9,200 in interest on top of the $27,000 principal. Graduate borrowers, who can borrow up to $20,500 a year in unsubsidized loans against a $138,500 aggregate cap (including undergraduate borrowing) at the higher 7.94% rate, see interest add up faster.11Federal Student Aid. Annual and Aggregate Loan Limits Borrowing less, paying interest during school, and using the autopay discount all pull that lifetime total down.
Deducting Student Loan Interest at Tax Time
You can deduct up to $2,500 of student loan interest paid in a year without itemizing. It is an above-the-line deduction, taken directly against your taxable income.12Internal Revenue Service. Publication 970 – Tax Benefits for Education For the 2025 tax year, the deduction phases out between $85,000 and $100,000 in modified adjusted gross income for single filers, and between $170,000 and $200,000 for joint filers. Above the upper end of those ranges, no deduction is available. The income thresholds change over time, so verify the current figures in IRS Publication 970 before you file.