Your 20-Year-Old Student Loan Just Reset to 5.98%. A New One Costs 6.52%.

If your federal student loan was first disbursed before July 1, 2006, it does not have a fixed rate. It has one that resets every July 1, and the Education Department just published this year’s number.

In repayment, you’re at 5.98%.

A brand-new undergraduate loan signed this fall costs 6.52%. Your twenty-year-old loan is the cheaper one.

Three notices went into the Federal Register on September 10. One for Direct Loans, one for the old FFEL loans the banks used to issue, one for this year’s fixed rates. The first two are the ones nobody reads.

Here’s how the rate gets built. The Department takes the bond-equivalent yield on the 91-day Treasury bill auctioned last before June 1, then adds a number Congress wrote into the statute. This year the bill came in at 3.678%, rounded to 3.68%, from the auction on May 26, 2026.

Add 2.30% and you get the 5.98% that Stafford, Direct Subsidized, and Direct Unsubsidized borrowers in repayment pay. In school, in grace, or in deferment, the add-on is 1.70% and the rate is 5.38%. Old PLUS loans get 3.10% and land at 6.78%. Pre-1998 PLUS loans and the old SLS loans run off the one-year Treasury instead, 3.99% this year, for a rate of 7.09%.

Nobody mails you this. It turns up as a slightly different interest line on a statement you stopped reading years ago.

The comparison that matters

From the third notice, the fixed rates on loans disbursed this year: 6.52% for undergraduates, 8.07% for graduate students, 9.07% for Parent PLUS. Your old variable PLUS at 6.78% sits 2.29 points under what a parent signing this fall pays for the life of the loan.

There is also a ceiling on yours. Congress capped these loans at 8.25% for Stafford and Direct Subsidized and Unsubsidized, 9.00% for PLUS, and 11.00% for SLS. Whatever the Treasury does, your rate stops there. Most people carrying one of these loans have never been told the cap exists.

Here’s what they don’t tell you

The obvious move looks like consolidating into a Direct Consolidation Loan to lock in a fixed rate. Read the formula before you do it. Federal rules set the consolidation rate at the weighted average of the loans you fold in, rounded up to the nearest one-eighth of one percent. Round 5.98% up and you land at 6.00%.

Two basis points for certainty. That is not a rip-off.

It is also not free. You hand back the statutory cap, and you hand back the downside. The index here is a short Treasury bill, so it tracks the Fed’s target rate. It can go up next July. It can also go down, and a fixed loan never does.

Your call. Just make it knowing what you’re trading, not because a headline told you variable is scary.

Do this now

Log into your servicer and read the actual interest rate on each loan. If the loan was first disbursed between July 1, 1998 and June 30, 2006 and you’re in repayment, it should say 5.98%. If it says something else, ask which notice they applied.

Write your cap down. 8.25%, 9.00%, or 11.00%, depending on the loan type. That is the worst this debt can ever do to you.

Then put both numbers through the student loan calculator before you go near consolidation. Same balance, 5.98% variable with a cap against 6.00% fixed forever. Compare the total interest, then decide.

The fine print

The variable-rate group is narrow. Anything first disbursed on or after July 1, 2006 is fixed, and none of this touches it.

One oddity worth flagging. The HEAL portion of an old FFEL consolidation loan sits at 6.72% this year, and it carries no statutory maximum at all. If that is your loan, the cap conversation above does not apply to you.

For the rest of this year’s federal loan terms, start at our education hub.

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