Interest Rates on Federal Loans Will Hit Record Low

The interest rates on federal student loans will fall by about half a percentage point in the 2016-17 academic year, to the lowest point in history, based on the results of the Treasury Department's auction on 10-year notes. The rate on federal undergraduate loans will drop to 3.76 percent from the current 4.29 percent, and the rate for graduate Stafford loans will fall to 5.31 percent and for Grad PLUS and Parent PLUS loans to 6.31 percent.

The interest rates on student loans used to be set by congressional action, but 2013 legislation linked the rates to market fluctuations.