Student Loan Interest Rates Drop and Pell Grant Maximums Increase

Interest rates for the most common types of student loans will decrease on July 1, falling to the lowest level in over 10 years. The Pell Grant maximum amount will also increase on July 1.

Education Loans

Student loans for undergraduate students will drop to a 3.76% interest rate from the current 4.29%; loans for graduate students will drop to 5.31% from 5.84%; and parents taking out loans for their children will pay 6.31%, down from 6.84%.

The rates will change July 1 and will apply only to student loans taken between July 1, 2016 and June 30, 2017. Every July 1, the rates change, but loans are locked in at the interest rate in effect when they are taken.

There are several types of student loans

  • Stafford Loans: These are the most common. There are 2 types of Stafford Loans:
    • Subsidized -The subsidized loan is based on the student's financial need and is only available for undergraduate students. You don't have to pay interest on the loan until 6 months after you are out of school.
    • Unsubsidized - The unsubsidized loan is available to everyone, and interest will start being charged from the date you get the loan. You can delay your loan repayment until after you get out of school, but you will have all your back interest added on to the loan balance.
  • Perkins Loans: The Perkins loan is available to students with "exceptional financial need". This loan has an interest rate of 5% and is given by only by participating schools.
  • PLUS Loans: These loans are available to graduate students and the parents of undergraduate students. The original, now obsolete, meaning of the acronym PLUS was "Parent Loan for Undergraduate Students".

Education Grants

Pell Grants

The maximum amount of the Pell Grant is also increasing on July 1, it is going from $5,775 to $5,815 per year. Unlike a loan, a grant does not have to be repaid. Federal Pell Grants usually are awarded only to undergraduate students and are based on financial need. For more information see our Pell Grants page.

FSEOG Grants

The Federal Supplemental Educational Opportunity Grant (FSEOG) are reserved for the most needy candidates, and are paid in addition to Pell grants. FSEO Grants are also limited from  $100  to $4,000 per school year.

TEACH Grants

The TEACH Grant Program provides grants of up to $4,000 a year to students who are completing or plan to complete course work needed to begin a career in teaching.

Iraq and Afghanistan Service Grants

One often overlooked type of grant money is the Iraq & Afghanistan Service Grant. You may be eligible to receive the Iraq and Afghanistan Service Grant if:

  • you are not eligible for a Federal Pell Grant on the basis of your Expected Family Contribution but
  • meet the remaining Federal Pell Grant eligibility requirements, and
  • your parent or guardian was a member of the U.S. armed forces and died as a result of military service performed in Iraq or Afghanistan after the events of 9/11, and
  • you were under 24 years old or enrolled in college at least part-time at the time of your parent's or guardian's death.

The Iraq & Afghanistan Service Grant is usually equal to the Pell Grant limits, which means it is increasing to $5,815 effective July 1 of this year. See our Iraq and Afghanistan Service Grant page for more details, including how to apply.

For More Information

See our Federal Student Aid page for more details on any of these programs, including funding fees, interest rates, requirements, and how to apply.


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