Interest rates on Stafford Loans may vary and are determined based upon the date the loan was disbursed. They may also vary by the education level (undergraduate or graduate) of the student. Interest rates do not vary with default risk: all students receive the same interest rate regardless of their major or their future employment prospects.
For variable rate loans, the rates are set annually using the price of the 91-day Treasury bill on the last Monday of May, and become effective for the following year on July 1. For fiscal year 2008-2009, the 91-day Treasury bill auctioned on May 27, 2008 at 1.905% (rounded to 1.91%) was used for the calculation. On May 26, 2009 the 91-day Treasury bill was auctioned at an investment rate of 0.178%. On July 1, 2009, the base rate for variable rate Stafford Loans were adjusted to 0.18%. Loans issued before July 1, 1998 were adjusted to a rate of 3.28%. Loans issued between July 1, 1998 and June 30, 2006 were adjusted to a rate of 2.48%.
As of July 1, 2006, all Stafford Loans are issued with a fixed interest rate. For direct loans and most loan providers, the rate is currently set at 6.80% for unsubsidized loans, with lower rates for subsidized loans for undergraduates, usually about 3.40%.
On August 9, 2013, President Obama signed the Bipartisan Student Loan Certainty Act of 2013, changing how student loan interest rates are determined. The bill links student loan rates to the Federal 10-year Treasury rate, plus a small margin. The new rates are retroactive for all loans disbursed on or after July 1, 2013. That effectively reversed an increase in interest rate from 3.40% to 6.80% for affected loans. Federal student loan interest rates are fixed for the life of the loan; however, the rates for new loans will change annually, based on the current market. The interest rates for the 2013-2014 academic year are as follows: 3.86% for undergraduate Stafford Loans (both subsidized and unsubsidized) 5.41% for graduate Stafford Loans