FAFSA loan interest rates - fixed or increasing if unable to pay?
I'm trying to figure out how federal student loan interest works for my financial planning. If I graduate but can't make my loan payments right away (like if I'm job hunting), will the interest rate on my FAFSA loans increase each year I can't pay? Or is the interest rate fixed when I first take out the loan? I've heard conflicting things - my cousin said his rate went up after missing payments but my advisor said federal loans have fixed rates? I need to know what I'm getting myself into before taking these loans. Thanks!
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Yuki Kobayashi
Federal student loans from FAFSA have FIXED interest rates that don't change over the life of the loan, regardless of whether you can make payments or not. Your cousin might be confusing interest ACCRUAL with interest RATES. When you don't pay, interest still builds up (accrues) on your outstanding balance, but the percentage rate itself doesn't increase as a penalty. That's one big advantage of federal loans over private ones.
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Carmen Vega
ā¢^^^ This. I've had my fed loans for 6 yrs now and the rate hasn't changed once. But the TOTAL amount I owe keeps going up bc of that interest building up, which maybe is what ur cousin meant?
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AstroAce
ā¢Wait so the amount I owe can still increase even if the rate doesn't change? That seems just as bad? I'm confused...
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Andre Rousseau
so accrual is difrent than rate changes!!!! ur cousins prob talkin bout the TOTAL goin up not the RATE... i thought the same thing but my total went up by like $1200 after a year of forbearance even tho my rate stayed at 4.5% the WHOLE time. it's confusin
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Zoe Stavros
ā¢Great point about the distinction between accrual and rate changes. To clarify for everyone: federal student loan interest rates are set by Congress each year, but once you take out the loan, YOUR specific rate is fixed for the lifetime of that loan. However, if you take new loans in different academic years, those could have different rates from your earlier loans.
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Jamal Harris
The government is CLEARLY taking advantage of students with this system!!! They advertise "fixed rates" but don't clearly explain how compound interest works so people end up owing WAY more than they borrowed! My $32,000 in loans from 2018 is somehow $41,700 now even though I've been on income-based repayment the whole time! The whole system is DESIGNED to keep us in debt forever!!! š
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Zoe Stavros
ā¢While I understand your frustration, it's important to understand that this isn't unique to student loans - it's how all loans work. If your income-based payments are less than the monthly interest, the unpaid interest gets added to your principal. This is called negative amortization. The Department of Education provides loan simulators that show you exactly how this will affect your balance over time.
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GalaxyGlider
I tried calling FSA about this same question last month! Spent 3 hours on hold and got disconnected twice lol š Good luck getting through to anyone who can actually explain interest policies!
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Mei Wong
ā¢I had the same problem trying to get through to someone at Federal Student Aid about my interest concerns. After multiple disconnections, I finally tried using Claimyr (claimyr.com) to get through to an agent without the wait. They have a video showing how it works: https://youtu.be/TbC8dZQWYNQ. Basically saved me hours of frustration and the agent was able to explain exactly how the interest would work for my specific loan situation. Worth it just to get a clear explanation directly from FSA.
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Zoe Stavros
To directly answer your question: Federal student loan interest rates are fixed for the life of each loan. The current rates for the 2025-2026 academic year are: ā¢ Undergraduate Direct Subsidized/Unsubsidized: 5.38% ā¢ Graduate/Professional Direct Unsubsidized: 7.05% ā¢ Direct PLUS Loans (Parents and Graduate Students): 8.05% These rates will not increase if you can't make payments. However, there are a few important things to understand: 1. Interest continues to accrue when loans are in forbearance or deferment (except for subsidized loans during deferment) 2. If you're on an income-driven repayment plan and your payment doesn't cover the monthly interest, the unpaid interest may capitalize (be added to your principal) 3. Late payments can result in late fees, but not interest rate increases 4. Default can lead to collection fees, but again, not rate increases Your cousin might be referring to the total amount increasing due to accrued interest, or might have private loans (which sometimes have variable rates).
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AstroAce
ā¢Thank you so much for this detailed explanation! This is exactly what I needed to know. I'm thinking of taking subsidized loans if possible since it sounds like those don't accrue interest during deferment periods? And now I understand why my cousin thought his rate increased - it must have been the total amount going up because of that capitalization thing.
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Yuki Kobayashi
One more thing to consider - while your federal loan rates won't increase, each year's new FAFSA loans might have different rates. So your freshman year loans might be at 5.38%, but if rates change next year, your sophomore loans could have a different rate. Each loan keeps its original rate forever, but you end up with a mix of different rates across your total student debt.
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Andre Rousseau
ā¢omg this is so true!! i have like 6 diff loans all with sliiightly diff rates and it makes my head spin tryin to keep track of em all when im payin em back!!
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Carmen Vega
My brother had this same worry! He graduated 2yrs ago and couldn't find a job for 9mo, but his rates stayed exactly the same as when he started. He did have to call and request forbearance tho so he wouldn't get dinged for missed payments. Interest still built up tho except on his subsidized ones.
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AstroAce
ā¢That's reassuring to hear a real example. I'll definitely prioritize subsidized loans then if I qualify. Thanks for sharing your brother's experience!
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