DOE Lowers Federal Student Loan Interest Rates for 2025-26

The U.S. Department of Education has announced a 0.14 percentage-point reduction in federal student loan interest rates for the 2025-2026 academic year, marking the first decrease in five years and offering modest relief to new borrowers amid mounting education costs and economic uncertainty. However, a proposed federal budget bill currently in the Senate could significantly limit future access to federal student loans by lowering annual and aggregate loan caps, eliminating subsidized loans, and removing Grad PLUS loans for undergraduates, potentially forcing more students to turn to private lenders without federal protections or forgiveness options. While students preparing for the fall 2025 semester are encouraged to maximize grants and scholarships before resorting to loans, the looming changes could alter how families finance higher education in coming years. These developments come as average college tuition continues to rise, making planning and awareness of upcoming financial aid changes crucial for prospective students and their families.