How the latest interest rate increase affects college students
On September 16, 2026, the Federal Reserve raised its target range for the federal funds rate by 0.25 percentage points. The range is now 3.75% to 4%. Changes to this rate can affect borrowing costs, but students will not all feel the change in the same way. It depends on the type of loan or account they have.
The increase does not change the rate on federal Direct Loans students already have. These loans have fixed rates, which stay the same for the life of the loan. For undergraduate Direct Subsidized and Unsubsidized Loans first disbursed between July 1, 2026, and June 30, 2027, the rate is 6.52%. That rate was calculated using a Treasury note auction and a formula set by law, so the Federal Reserve’s September decision did not set it.
Private student loans can work differently. Some have variable rates, which may change when the index listed in the loan agreement changes. A student with this kind of loan could see their rate or payment go up. Many credit cards also have variable rates tied to an index, such as the prime rate. If a student carries a balance and the card rate increases, they could pay more interest.
Savings rates may change too, but banks set their own rates. Some may raise the rates they offer on savings accounts or new certificates of deposit, while others may leave them the same. A student with a fixed federal loan will keep the same rate. The change is more likely to affect students with variable-rate loans or credit cards, and it could mean more interest for students whose banks raise their savings rates.
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