A parent who borrows $40,000 through the federal PLUS program for the 2026-27 school year will owe roughly $507 every month for the next decade, paying back more than $60,000 before the loan is retired. That is the consequence of a fixed interest rate that climbs to 9.07% for loans first disbursed on or after July 1, 2026, up from 8.94% in 2025-26 and nearly double the 4.99% rate families locked in as recently as 2021-22.
The increase, while small in percentage-point terms, arrives on top of years of rising rates that have made the PLUS program one of the most expensive ways to finance an undergraduate education. Below is how the rate is set, what it actually costs, and what parents can do before signing the promissory note.
How the 9.07% rate is calculated
Congress stopped setting student-loan rates by hand in 2013. The Bipartisan Student Loan Certainty Act replaced that process with a formula: take the high yield from the 10-year Treasury note auction held in May, then add a fixed margin that varies by loan type. For Parent PLUS loans, the add-on is 4.6 percentage points.
The May 2026 auction of 10-year Treasury notes produced a high yield that, combined with the 4.6-point margin, results in the 9.07% figure. Once locked, that rate is fixed for the life of every PLUS loan first disbursed between July 1, 2026, and June 30, 2027. It does not adjust retroactively for borrowers who secured earlier rates.
The same formula governs undergraduate Direct Subsidized and Unsubsidized loans (margin of 2.05 points) and graduate Direct Unsubsidized loans (margin of 3.6 points). The Department of Education’s Federal Student Aid office publishes the methodology each year in an electronic announcement; the 2025-26 version confirms the formula mechanics that carry forward into 2026-27.
The real cost of a $40,000 Parent PLUS loan at 9.07%
The interest rate is only part of the sticker shock. The federal government also charges a loan origination fee on every PLUS disbursement. For loans disbursed during the 2025-26 fiscal year, that fee is 4.228%, though the exact percentage for disbursements after October 1, 2026, is subject to annual adjustment. On a $40,000 loan at the current fee rate, roughly $1,691 is stripped off the top before a single dollar reaches the school’s bursar office. The family receives about $38,309 but owes interest on the full $40,000.
A parent who actually needs $40,000 credited to the student’s account would have to borrow closer to $41,770 to cover the gap, pushing the monthly payment above $530 on the standard 10-year plan.
Under standard amortization at 9.07%, a $40,000 PLUS loan breaks down roughly as follows over 10 years:
- Monthly payment: approximately $507
- Total repaid over 10 years: approximately $60,840
- Total interest alone: approximately $20,840
Those figures assume the borrower enters repayment immediately and never defers. Many parents choose to postpone payments while the student is enrolled, which causes unpaid interest to capitalize and raises the total cost further.
How 9.07% compares to recent years
Parent PLUS rates bottomed out at 4.99% for loans disbursed in the 2021-22 award year, when pandemic-era monetary policy held Treasury yields near historic lows. The climb since then has been sharp:
- 2021-22: 4.99%
- 2022-23: 7.54%
- 2023-24: 8.05%
- 2024-25: 9.08%
- 2025-26: 8.94%
- 2026-27: 9.07%
The 2026-27 rate is essentially a return to the 2024-25 near-peak after a brief dip last year. To put it in dollar terms: a parent who borrowed $40,000 at 4.99% in 2021-22 would pay about $424 a month and roughly $50,900 total. The same loan at 9.07% costs $83 more each month and nearly $10,000 more over the life of the loan.
The statutory cap for PLUS loans under the 2013 law is 10.5%, a ceiling that once seemed distant but now sits fewer than 1.5 percentage points away.
Repayment options parents should know about
Parent PLUS borrowers do not qualify for most income-driven repayment plans available to students. The one workaround: a parent can consolidate a PLUS loan into a federal Direct Consolidation Loan and then enroll in the Income-Contingent Repayment (ICR) plan, which caps payments at 20% of discretionary income and forgives any remaining balance after 25 years.
That path lowers the monthly bill for parents with modest incomes but typically increases total interest paid. Consolidation also resets the clock on any progress toward forgiveness and locks in a weighted-average interest rate rounded up to the nearest one-eighth of a percent, so it does not reduce the rate itself.
Other options include:
- Graduated repayment: Payments start lower and increase every two years over a 10-year term. Total interest is higher than the standard plan.
- Extended repayment: Stretches the term to up to 25 years for borrowers with more than $30,000 in Direct Loans, cutting the monthly payment but roughly doubling total interest.
- Refinancing with a private lender: Parents with strong credit may qualify for a lower rate, but refinancing forfeits all federal protections, including deferment, forbearance, and any path to forgiveness.
It is also worth noting that interest paid on Parent PLUS loans may be tax-deductible. The student loan interest deduction allows borrowers to deduct up to $2,500 per year in interest paid, subject to income limits, regardless of whether the borrower is the student or the parent.
What could shift for future borrowers
Because the PLUS rate is mechanically tied to Treasury yields, any movement in broader interest-rate conditions flows directly into what parents pay in subsequent years. If 10-year yields drop before the next pre-June auction, the 2027-28 rate could ease. If yields climb, the rate moves closer to the 10.5% statutory ceiling.
Policy reform is a perennial discussion that has produced little concrete change. Advocacy groups and some members of Congress have called for eliminating or reducing the origination fee, imposing tighter credit checks on PLUS applicants, and expanding income-driven repayment access for parents beyond the ICR workaround. None of those proposals have advanced to a floor vote in the current Congress.
What to do before you borrow
At 9.07%, a Parent PLUS loan is more expensive than many home-equity lines of credit and some private student loans. Families weighing this option should run their specific numbers through the federal Loan Simulator before committing, comparing the standard plan against graduated, extended, and ICR scenarios.
Exhaust every lower-cost alternative first. The student’s own federal Direct Loan eligibility carries a lower rate and a lower origination fee. Institutional grants, state aid, work-study, and employer tuition-assistance programs all reduce the amount a parent needs to borrow. A Parent PLUS loan is easy to obtain, requiring only that the applicant not have an adverse credit history, but that accessibility is precisely what makes it risky. The federal government will approve a loan amount up to the full cost of attendance minus other aid, with no assessment of whether the parent can realistically afford the payments.
For families who do borrow, paying interest while the student is still enrolled, even a small amount each month, prevents capitalization and can save thousands over the life of the loan. On a $40,000 PLUS loan at 9.07%, interest accrues at roughly $302 per month. A parent who covers even half of that during a four-year enrollment period avoids thousands of dollars in capitalized interest and keeps the total obligation much closer to the $40,000 originally borrowed.
