---
kind: "section"
citation: "20 U.S.C. § 1077a"
title: "20"
title_heading: "Education"
number: "1077a"
heading: "Applicable interest rates"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/20/1077a"
units:
  - "Chapter 28 — Higher Education Resources and Student Assistance"
  - "Subchapter IV — Student Assistance"
  - "Part B — Federal Family Education Loan Program"
---

# §1077a. Applicable interest rates

- (a) **Rates to be consistent for borrower’s entire debt—** With respect to any [loan](/usc/20/1066a.md?p=2) to cover the cost of instruction for any period of instruction beginning on or after January 1, 1981, the rate of [interest](/usc/20/1066a.md?p=6) applicable to any borrower shall—
  - (1) not exceed 7 percent per year on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2) in the case of any borrower who, on the date of entering into the note or other written evidence of that [loan](/usc/20/1066a.md?p=2), has an [outstanding](/usc/20/1066a.md?p=7) balance of principal or [interest](/usc/20/1066a.md?p=6) on any [loan](/usc/20/1066a.md?p=2) made, insured, or guaranteed under this part, for which the [interest](/usc/20/1066a.md?p=6) rate does not exceed 7 percent;
  - (2) except as provided in [paragraph (3)](#a-3), be 9 percent per year on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2) in the case of any borrower who, on the date of entering into the note or other written evidence of that [loan](/usc/20/1066a.md?p=2), has no [outstanding](/usc/20/1066a.md?p=7) balance of principal or [interest](/usc/20/1066a.md?p=6) on any [loan](/usc/20/1066a.md?p=2) described in [paragraph (1)](#a-1) or any [loan](/usc/20/1066a.md?p=2) for which the [interest](/usc/20/1066a.md?p=6) rate is determined under [paragraph (1)](#a-1); or
  - (3) be 8 percent per year on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2) for a [loan](/usc/20/1066a.md?p=2) to cover the cost of education for any period of enrollment beginning on or after a date which is 3 months after a determination made under [subsection (b)](#b) in the case of any borrower who, on the date of entering into the note or other written evidence of the [loan](/usc/20/1066a.md?p=2), has no [outstanding](/usc/20/1066a.md?p=7) balance of principal or [interest](/usc/20/1066a.md?p=6) on any [loan](/usc/20/1066a.md?p=2) for which the [interest](/usc/20/1066a.md?p=6) rate is determined under paragraph (1) or (2) of this subsection.
- (b) **Reduction for new borrowers after decline in Treasury bill rates—** If for any 12-month period beginning on or after January 1, 1981, the [Secretary](/usc/20/1003.md?p=17), after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury, determines that the average of the bond equivalent rates of 91-day Treasury bills auctioned for such 12-month period is equal to or less than 9 percent, the [interest](/usc/20/1066a.md?p=6) rate for [loans](/usc/20/1066a.md?p=2) under this part shall be the rate prescribed in [subsection (a)(3)](#a-3) for borrowers described in such subsection.
- (c) **Rates for supplemental loans for students and loans for parents—**
  - (1) **In general—** Except as otherwise provided in this subsection, the applicable rate of [interest](/usc/20/1066a.md?p=6) on [loans](/usc/20/1066a.md?p=2) made pursuant to [section 1078–1](/usc/20/1078–1.md)[^1] or [1078–2](/usc/20/1078–2.md) of this title on or after October 1, 1981, shall be 14 percent per year on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2).
  - (2) **Reduction of rate after decline in Treasury bill rates—** If for any 12-month period beginning on or after October 1, 1981, the [Secretary](/usc/20/1003.md?p=17), after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury, determines that the average of the bond equivalent rates of 91-day Treasury bills auctioned for such 12-month period is equal to or less than 14 percent, the applicable rate of [interest](/usc/20/1066a.md?p=6) for [loans](/usc/20/1066a.md?p=2) made pursuant to [section 1078–1](/usc/20/1078–1.md)[^1] or [1078–2](/usc/20/1078–2.md) of this title on and after the first day of the first month beginning after the date of publication of such determination shall be 12 percent per year on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2).
  - (3) **Increase of rate after increase in Treasury bill rates—** If for any 12-month period beginning on or after the date of publication of a determination under [paragraph (2)](#c-2), the [Secretary](/usc/20/1003.md?p=17), after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury, determines that the average of the bond equivalent rates of 91-day Treasury bills auctioned for such 12-month period exceeds 14 percent, the applicable rate of [interest](/usc/20/1066a.md?p=6) for [loans](/usc/20/1066a.md?p=2) made pursuant to [section 1078–1](/usc/20/1078–1.md)[^1] or [1078–2](/usc/20/1078–2.md) of this title on and after the first day of the first month beginning after the date of publication of that determination under this paragraph shall be 14 percent per year on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2).
  - (4) **Availability of variable rates—**
    - (A) For any [loan](/usc/20/1066a.md?p=2) made pursuant to [section 1078–1](/usc/20/1078–1.md)[^1] or [1078–2](/usc/20/1078–2.md) of this title and disbursed on or after July 1, 1987, or any [loan](/usc/20/1066a.md?p=2) made pursuant to such section prior to such date that is refinanced pursuant to [section 1078–1(d)](/usc/20/1078–1.md?p=d)[^1] or [1078–2(d)](/usc/20/1078–2.md?p=d) of this title, the applicable rate of [interest](/usc/20/1066a.md?p=6) during any 12-month period beginning on July 1 and ending on June 30 shall be determined under [subparagraph (B)](#c-4-B), except that such rate shall not exceed 12 percent.
    - (B)
      - (i) For any 12-month period beginning on July 1 and ending on or before June 30, 2001, the rate determined under this subparagraph is determined on the preceding June 1 and is equal to—
        - (I) the bond equivalent rate of 52-week Treasury bills auctioned at the final auction held prior to such June 1; plus
        - (II) 3.25 percent.
      - (ii) For any 12-month period beginning on July 1 of 2001 or any succeeding year, the rate determined under this subparagraph is determined on the preceding June 26 and is equal to—
        - (I) the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the last calendar week ending on or before such June 26; plus
        - (II) 3.25 percent.
    - (C) The [Secretary](/usc/20/1003.md?p=17) shall determine the applicable rate of [interest](/usc/20/1066a.md?p=6) under [subparagraph (B)](#c-4-B) after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination.
    - (D) Notwithstanding [subparagraph (A)](#c-4-A)—
      - (i) for any [loan](/usc/20/1066a.md?p=2) made pursuant to [section 1078–1](/usc/20/1078–1.md)[^1] of this title for which the first disbursement is made on or after October 1, 1992—
        - (I) [subparagraph (B)](#c-4-B) shall be applied by substituting “3.1” for “3.25”; and
        - (II) the [interest](/usc/20/1066a.md?p=6) rate shall not exceed 11 percent; and
      - (ii) for any [loan](/usc/20/1066a.md?p=2) made pursuant to [section 1078–2 of this title](/usc/20/1078–2.md) for which the first disbursement is made on or after October 1, 1992—
        - (I) [subparagraph (B)](#c-4-B) shall be applied by substituting “3.1” for “3.25”; and
        - (II) the [interest](/usc/20/1066a.md?p=6) rate shall not exceed 10 percent.
    - (E) Notwithstanding subparagraphs [(A)](#c-4-A) and [(D)](#c-4-D) for any [loan](/usc/20/1066a.md?p=2) made pursuant to [section 1078–2 of this title](/usc/20/1078–2.md) for which the first disbursement is made on or after July 1, 1994—
      - (i) [subparagraph (B)](#c-4-B) shall be applied by substituting “3.1” for “3.25”; and
      - (ii) the [interest](/usc/20/1066a.md?p=6) rate shall not exceed 9 percent.
- (d) **Interest rates for new borrowers after July 1, 1988—** Notwithstanding subsections [(a)](#a) and [(b)](#b) of this section, with respect to any [loan](/usc/20/1066a.md?p=2) (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to sections 1078–1,[^1] 1078–2, and [1078–3](/usc/20/1078–3.md) of this title) to cover the cost of instruction for any period of enrollment beginning on or after July 1, 1988, to any borrower who, on the date of entering into the note or other written evidence of the [loan](/usc/20/1066a.md?p=2), has no [outstanding](/usc/20/1066a.md?p=7) balance of principal or [interest](/usc/20/1066a.md?p=6) on any [loan](/usc/20/1066a.md?p=2) made, insured, or guaranteed under this part, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall be—
  - (1) 8 percent per year on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2) during the period beginning on the date of the disbursement of the [loan](/usc/20/1066a.md?p=2) and ending 4 years after the commencement of repayment; and
  - (2) 10 percent per year on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2) during the remainder of the repayment period.
- (e) **Interest rates for new borrowers after October 1, 1992—**
  - (1) **In general—** Notwithstanding subsections [(a)](#a), [(b)](#b), and [(d)](#d) of this section, with respect to any [loan](/usc/20/1066a.md?p=2) (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to sections 1078–1,[^1] 1078–2 and [1078–3](/usc/20/1078–3.md) of this title) for which the first disbursement is made on or after October 1, 1992, to any borrower who, on the date of entering into the note or other written evidence of the [loan](/usc/20/1066a.md?p=2), has no [outstanding](/usc/20/1066a.md?p=7) balance of principal or [interest](/usc/20/1066a.md?p=6) on any [loan](/usc/20/1066a.md?p=2) made, insured, or guaranteed under section [1077](/usc/20/1077.md), [1078](/usc/20/1078.md), or [1078–8](/usc/20/1078–8.md) of this title, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—
    - (A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus
    - (B) 3.10 percent,

    except that such rate shall not exceed 9 percent.

  - (2) **Consultation—** The [Secretary](/usc/20/1003.md?p=17) shall determine the applicable rate of [interest](/usc/20/1066a.md?p=6) under [paragraph (1)](#e-1) after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination.
- (f) **Interest rates for new loans after July 1, 1994—**
  - (1) **In general—** Notwithstanding subsections [(a)](#a), [(b)](#b), [(d)](#d), and [(e)](#e) of this section, with respect to any [loan](/usc/20/1066a.md?p=2) made, insured, or guaranteed under this part (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to section [1078–2](/usc/20/1078–2.md) or [1078–3](/usc/20/1078–3.md) of this title) for which the first disbursement is made on or after July 1, 1994, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—
    - (A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus
    - (B) 3.10 percent,

    except that such rate shall not exceed 8.25 percent.

  - (2) **Consultation—** The [Secretary](/usc/20/1003.md?p=17) shall determine the applicable rate of [interest](/usc/20/1066a.md?p=6) under [paragraph (1)](#f-1) after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination.
- (g) **In school and grace period rules—**
  - (1) **General rule—** Notwithstanding the provisions of [subsection (f)](#f), but subject to [subsection (h)](#h), with respect to any [loan](/usc/20/1066a.md?p=2) under section [1078](/usc/20/1078.md) or [1078–8](/usc/20/1078–8.md) of this title for which the first disbursement is made on or after July 1, 1995, the applicable rate of [interest](/usc/20/1066a.md?p=6) for [interest](/usc/20/1066a.md?p=6) which accrues—
    - (A) prior to the beginning of the repayment period of the [loan](/usc/20/1066a.md?p=2); or
    - (B) during the period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in section [1078(b)(1)(M)](/usc/20/1078.md?p=b-1-M) or [1077(a)(2)(C)](/usc/20/1077.md?p=a-2-C) of this title,

    shall not exceed the rate determined under [paragraph (2)](#g-2).

  - (2) **Rate determination—** For purposes of [paragraph (1)](#g-1), the rate determined under this paragraph shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—
    - (A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction prior to such June 1; plus
    - (B) 2.5 percent,

    except that such rate shall not exceed 8.25 percent.

  - (3) **Consultation—** The [Secretary](/usc/20/1003.md?p=17) shall determine the applicable rate of [interest](/usc/20/1066a.md?p=6) under this subsection after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination.
- (h) **Interest rates for new loans after July 1, 1998—**
  - (1) **In general—** Notwithstanding subsections [(a)](#a), [(b)](#b), [(d)](#d), [(e)](#e), [(f)](#f), and [(g)](#g) of this section, with respect to any [loan](/usc/20/1066a.md?p=2) made, insured, or guaranteed under this part (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to sections [1078–2](/usc/20/1078–2.md) and [1078–3](/usc/20/1078–3.md) of this title) for which the first disbursement is made on or after July 1, 1998, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—
    - (A) the bond equivalent rate of the securities with a comparable maturity as established by the [Secretary](/usc/20/1003.md?p=17); plus
    - (B) 1.0 percent,

    except that such rate shall not exceed 8.25 percent.

  - (2) **Interest rates for new PLUS loans after July 1, 1998—** Notwithstanding subsections [(a)](#a), [(b)](#b), [(d)](#d), [(e)](#e), [(f)](#f), and [(g)](#g), with respect to any [loan](/usc/20/1066a.md?p=2) made under [section 1078–2 of this title](/usc/20/1078–2.md) for which the first disbursement is made on or after July 1, 1998, [paragraph (1)](#h-1) shall be applied—
    - (A) by substituting “2.1 percent” for “1.0 percent” in [subparagraph (B)](#h-2-B); and
    - (B) by substituting “9.0 percent” for “8.25 percent” in the matter following such subparagraph.
  - (3) **Consultation—** The [Secretary](/usc/20/1003.md?p=17) shall determine the applicable rate of [interest](/usc/20/1066a.md?p=6) under this subsection after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination.
- (i) **Treatment of excess interest payments on new borrower accounts resulting from decline in Treasury bill rates—**
  - (1) **Excess interest on 10 percent loans—** If, with respect to a [loan](/usc/20/1066a.md?p=2) for which the applicable [interest](/usc/20/1066a.md?p=6) rate is 10 percent under [subsection (d)](#d) of this section at the close of any calendar quarter, the sum of the average of the bond equivalent rates of 91-day Treasury bills auctioned for that quarter and 3.25 percent is less than 10 percent, then an adjustment shall be made to a borrower’s account—
    - (A) by calculating excess [interest](/usc/20/1066a.md?p=6) in the amount computed under paragraph (2) of this subsection; and
    - (B)
      - (i) during any period in which a student is eligible to have [interest](/usc/20/1066a.md?p=6) payments paid on his or her behalf by the Government pursuant to [section 1078(a) of this title](/usc/20/1078.md?p=a), by crediting the excess [interest](/usc/20/1066a.md?p=6) to the Government; or
      - (ii) during any other period, by crediting such excess [interest](/usc/20/1066a.md?p=6) to the reduction of principal to the extent provided in paragraph (5) of this subsection.
  - (2) **Amount of adjustment for 10 percent loans—** The amount of any adjustment of [interest](/usc/20/1066a.md?p=6) on a [loan](/usc/20/1066a.md?p=2) to be made under this subsection for any quarter shall be equal to—
    - (A) 10 percent minus the sum of (i) the average of the bond equivalent rates of 91-day Treasury bills auctioned for such calendar quarter, and (ii) 3.25 percent; multiplied by
    - (B) the average daily principal balance of the [loan](/usc/20/1066a.md?p=2) (not including unearned [interest](/usc/20/1066a.md?p=6) added to principal) during such calendar quarter; divided by
    - (C) four.
  - (3) **Excess interest on loans after 1992 amendments, to borrowers with outstanding balances—** If, with respect to a [loan](/usc/20/1066a.md?p=2) made on or after July 23, 1992, to a borrower, who on the date of entering into the note or other written evidence of the [loan](/usc/20/1066a.md?p=2), has an [outstanding](/usc/20/1066a.md?p=7) balance of principal or [interest](/usc/20/1066a.md?p=6) on any other [loan](/usc/20/1066a.md?p=2) made, insured, or guaranteed under this part, the sum of the average of the bond equivalent rates of 91-day Treasury bills auctioned for that quarter and 3.1 percent is less than the applicable [interest](/usc/20/1066a.md?p=6) rate, then an adjustment shall be made—
    - (A) by calculating excess [interest](/usc/20/1066a.md?p=6) in the amount computed under paragraph (4) of this subsection; and
    - (B)
      - (i) during any period in which a student is eligible to have [interest](/usc/20/1066a.md?p=6) payments paid on his or her behalf by the Government pursuant to [section 1078(a) of this title](/usc/20/1078.md?p=a), by crediting the excess [interest](/usc/20/1066a.md?p=6) to the Government; or
      - (ii) during any other period, by crediting such excess [interest](/usc/20/1066a.md?p=6) to the reduction of principal to the extent provided in paragraph (5) of this subsection.
  - (4) **Amount of adjustment—** The amount of any adjustment of [interest](/usc/20/1066a.md?p=6) on a [loan](/usc/20/1066a.md?p=2) to be made under this subsection for any quarter shall be equal to—
    - (A) the applicable [interest](/usc/20/1066a.md?p=6) rate minus the sum of (i) the average of the bond equivalent rates of 91-day Treasury bills auctioned for such calendar quarter, and (ii) 3.1 percent; multiplied by
    - (B) the average daily principal balance of the [loan](/usc/20/1066a.md?p=2) (not including unearned [interest](/usc/20/1066a.md?p=6) added to principal) during such calendar quarter; divided by
    - (C) four.
  - (5) **Annual adjustment of interest and borrower eligibility for credit—** Any adjustment amount computed pursuant to paragraphs (2) and (4) of this subsection for any quarter shall be credited, by the [holder](/usc/20/1085.md?p=i) of the [loan](/usc/20/1066a.md?p=2) on the last day of the calendar year in which such quarter falls, to the [loan](/usc/20/1066a.md?p=2) account of the borrower so as to reduce the principal balance of such account. No such credit shall be made to the [loan](/usc/20/1066a.md?p=2) account of a borrower who on the last day of the calendar year is delinquent for more than 30 days in making a required payment on the [loan](/usc/20/1066a.md?p=2), but the excess [interest](/usc/20/1066a.md?p=6) shall be calculated and credited to the [Secretary](/usc/20/1003.md?p=17). Any credit which is to be made to a borrower’s account pursuant to this subsection shall be made effective commencing no later than 30 days following the last day of the calendar year in which the quarter falls for which the credit is being made. Nothing in this subsection shall be construed to require refunding any repayment of a [loan](/usc/20/1066a.md?p=2). At the option of the [lender](/usc/20/1019.md?p=6), the amount of such adjustment may be distributed to the borrower either by reduction in the amount of the periodic payment on [loan](/usc/20/1066a.md?p=2), by reducing the number of payments that shall be made with respect to the [loan](/usc/20/1066a.md?p=2), or by reducing the amount of the final payment of the [loan](/usc/20/1066a.md?p=2). Nothing in this paragraph shall be construed to require the [lender](/usc/20/1019.md?p=6) to make additional disclosures pursuant to [section 1083(b) of this title](/usc/20/1083.md?p=b).
  - (6) **Publication of Treasury bill rate—** For the purpose of enabling [holders](/usc/20/1085.md?p=i) of [loans](/usc/20/1066a.md?p=2) to make the determinations and adjustments provided for in this subsection, the [Secretary](/usc/20/1003.md?p=17) shall for each calendar quarter commencing with the quarter beginning on July 1, 1987, publish a notice of the average of the bond equivalent rates of 91-day Treasury bills auctioned for such quarter. Such notice shall be published not later than 7 days after the end of the quarter to which the notice relates.
  - (7) **Conversion to variable rate—**
    - (A) Subject to subparagraphs [(C)](#i-7-C) and [(D)](#i-7-D), a [lender](/usc/20/1019.md?p=6) or [holder](/usc/20/1085.md?p=i) shall convert the [interest](/usc/20/1066a.md?p=6) rate on a [loan](/usc/20/1066a.md?p=2) that is made pursuant to this part and is subject to the provisions of this subsection to a variable rate. Such conversion shall occur not later than January 1, 1995, and, commencing on the date of conversion, the applicable [interest](/usc/20/1066a.md?p=6) rate for each 12-month period beginning on July 1 and ending on June 30 shall be determined by the [Secretary](/usc/20/1003.md?p=17) on the June 1 preceding each such 12-month period and be equal to the sum of (i) the bond equivalent rate of the 91-day Treasury bills auctioned at the final auction prior to such June 1; and (ii) 3.25 percent in the case of [loans](/usc/20/1066a.md?p=2) described in [paragraph (1)](#i-1), or 3.10 percent in the case of [loans](/usc/20/1066a.md?p=2) described in [paragraph (3)](#i-3).
    - (B) In connection with the conversion specified in [subparagraph (A)](#i-7-A) for any period prior to such conversion, and subject to paragraphs (C) and (D), a [lender](/usc/20/1019.md?p=6) or [holder](/usc/20/1085.md?p=i) shall convert the [interest](/usc/20/1066a.md?p=6) rate to a variable rate on a [loan](/usc/20/1066a.md?p=2) that is made pursuant to this part and is subject to the provisions of this subsection to a variable rate. The [interest](/usc/20/1066a.md?p=6) rates for such period shall be reset on a quarterly basis and the applicable [interest](/usc/20/1066a.md?p=6) rate for any quarter or portion thereof shall equal the sum of (i) the average of the bond equivalent rates of 91-Treasury bills auctioned for the preceding 3-month period, and (ii) 3.25 percent in the case of [loans](/usc/20/1066a.md?p=2) described in [paragraph (1)](#i-1) or 3.10 percent in the case of [loans](/usc/20/1066a.md?p=2) described in [paragraph (3)](#i-3). The rebate of excess [interest](/usc/20/1066a.md?p=6) derived through this conversion shall be provided to the borrower as specified in [paragraph (5)](#i-5) for [loans](/usc/20/1066a.md?p=2) described in [paragraph (1)](#i-1) or to the Government and borrower as specified in [paragraph (3)](#i-3).
    - (C) A [lender](/usc/20/1019.md?p=6) or [holder](/usc/20/1085.md?p=i) of a [loan](/usc/20/1066a.md?p=2) being converted pursuant to this paragraph shall complete such conversion on or before January 1, 1995. The [lender](/usc/20/1019.md?p=6) or [holder](/usc/20/1085.md?p=i) shall notify the borrower that the [loan](/usc/20/1066a.md?p=2) shall be converted to a variable [interest](/usc/20/1066a.md?p=6) rate and provide a description of the rate to the borrower not later than 30 days prior to the conversion. The notice shall advise the borrower that such rate shall be calculated in accordance with the procedures set forth in this paragraph and shall provide the borrower with a substantially equivalent benefit as the adjustment otherwise provided for under this subsection. Such notice may be incorporated into the disclosure required under [section 1083(b) of this title](/usc/20/1083.md?p=b) if such disclosure has not been previously made.
    - (D) The [interest](/usc/20/1066a.md?p=6) rate on a [loan](/usc/20/1066a.md?p=2) converted to a variable rate pursuant to this paragraph shall not exceed the maximum [interest](/usc/20/1066a.md?p=6) rate applicable to the [loan](/usc/20/1066a.md?p=2) prior to such conversion.
    - (E) [Loans](/usc/20/1066a.md?p=2) on which the [interest](/usc/20/1066a.md?p=6) rate is converted in accordance with subparagraph [(A)](#i-7-A) or [(B)](#i-7-B) shall not be subject to any other provisions of this subsection.
- (j) **Interest rates for new loans between July 1, 1998, and October 1, 1998—**
  - (1) **In general—** Notwithstanding [subsection (h)](#h), but subject to [paragraph (2)](#j-2), with respect to any [loan](/usc/20/1066a.md?p=2) made, insured, or guaranteed under this part (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to section [1078–2](/usc/20/1078–2.md) or [1078–3](/usc/20/1078–3.md) of this title) for which the first disbursement is made on or after July 1, 1998, and before October 1, 1998, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—
    - (A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus
    - (B) 2.3 percent,

    except that such rate shall not exceed 8.25 percent.

  - (2) **In school and grace period rules—** Notwithstanding [subsection (h)](#h), with respect to any [loan](/usc/20/1066a.md?p=2) under this part (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to section [1078–2](/usc/20/1078–2.md) or [1078–3](/usc/20/1078–3.md) of this title) for which the first disbursement is made on or after July 1, 1998, and before October 1, 1998, the applicable rate of [interest](/usc/20/1066a.md?p=6) for [interest](/usc/20/1066a.md?p=6) which accrues—
    - (A) prior to the beginning of the repayment period of the [loan](/usc/20/1066a.md?p=2); or
    - (B) during the period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in section [1078(b)(1)(M)](/usc/20/1078.md?p=b-1-M) or [1077(a)(2)(C)](/usc/20/1077.md?p=a-2-C) of this title,

    shall be determined under [paragraph (1)](#j-1) by substituting “1.7 percent” for “2.3 percent”.

  - (3) **PLUS loans—** Notwithstanding [subsection (h)](#h), with respect to any [loan](/usc/20/1066a.md?p=2) under [section 1078–2 of this title](/usc/20/1078–2.md) for which the first disbursement is made on or after July 1, 1998, and before October 1, 1998, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of—
    - (A)
      - (i) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus
      - (ii) 3.1 percent; or
    - (B) 9.0 percent.
  - (4) **Consultation—** The [Secretary](/usc/20/1003.md?p=17) shall determine the applicable rate of [interest](/usc/20/1066a.md?p=6) under this subsection after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination.
- (k) **Interest rates for new loans on or after October 1, 1998, and before July 1, 2006—**
  - (1) **In general—** Notwithstanding [subsection (h)](#h) and subject to paragraph (2) of this subsection, with respect to any [loan](/usc/20/1066a.md?p=2) made, insured, or guaranteed under this part (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to section [1078–2](/usc/20/1078–2.md) or [1078–3](/usc/20/1078–3.md) of this title) for which the first disbursement is made on or after October 1, 1998, and before July 1, 2006, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—
    - (A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus
    - (B) 2.3 percent,

    except that such rate shall not exceed 8.25 percent.

  - (2) **In school and grace period rules—** Notwithstanding [subsection (h)](#h), with respect to any [loan](/usc/20/1066a.md?p=2) under this part (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to section [1078–2](/usc/20/1078–2.md) or [1078–3](/usc/20/1078–3.md) of this title) for which the first disbursement is made on or after October 1, 1998, and before July 1, 2006, the applicable rate of [interest](/usc/20/1066a.md?p=6) for [interest](/usc/20/1066a.md?p=6) which accrues—
    - (A) prior to the beginning of the repayment period of the [loan](/usc/20/1066a.md?p=2); or
    - (B) during the period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in section [1077(a)(2)(C)](/usc/20/1077.md?p=a-2-C) or [1078(b)(1)(M)](/usc/20/1078.md?p=b-1-M) of this title,

    shall be determined under [paragraph (1)](#k-1) by substituting “1.7 percent” for “2.3 percent”.

  - (3) **PLUS loans—** Notwithstanding [subsection (h)](#h), with respect to any [loan](/usc/20/1066a.md?p=2) under [section 1078–2 of this title](/usc/20/1078–2.md) for which the first disbursement is made on or after October 1, 1998, and before July 1, 2006, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall be determined under [paragraph (1)](#k-1)—
    - (A) by substituting “3.1 percent” for “2.3 percent”; and
    - (B) by substituting “9.0 percent” for “8.25 percent”.
  - (4) **Consolidation loans—** With respect to any consolidation [loan](/usc/20/1066a.md?p=2) under [section 1078–3 of this title](/usc/20/1078–3.md) for which the application is received by an [eligible lender](/usc/20/1019.md?p=4) on or after October 1, 1998, and before July 1, 2006, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall be at an annual rate on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2) that is equal to the lesser of—
    - (A) the weighted average of the [interest](/usc/20/1066a.md?p=6) rates on the [loans](/usc/20/1066a.md?p=2) consolidated, rounded to the nearest higher one-eighth of 1 percent; or
    - (B) 8.25 percent.
  - (5) **Consultation—** The [Secretary](/usc/20/1003.md?p=17) shall determine the applicable rate of [interest](/usc/20/1066a.md?p=6) under this subsection after consultation with the [Secretary](/usc/20/1003.md?p=17) of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination.
- (l) **Interest rates for new loans on or after July 1, 2006, and before July 1, 2010—**
  - (1) **In general—** Notwithstanding [subsection (h)](#h), with respect to any [loan](/usc/20/1066a.md?p=2) made, insured, or guaranteed under this part (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to section [1078–2](/usc/20/1078–2.md) or [1078–3](/usc/20/1078–3.md) of this title) for which the first disbursement is made on or after July 1, 2006, and before July 1, 2010, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall be 6.8 percent on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2).
  - (2) **PLUS loans—** Notwithstanding [subsection (h)](#h), with respect to any [loan](/usc/20/1066a.md?p=2) under [section 1078–2 of this title](/usc/20/1078–2.md) for which the first disbursement is made on or after July 1, 2006, and before July 1, 2010, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall be 8.5 percent on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2).
  - (3) **Consolidation loans—** With respect to any consolidation [loan](/usc/20/1066a.md?p=2) under [section 1078–3 of this title](/usc/20/1078–3.md) for which the application is received by an [eligible lender](/usc/20/1019.md?p=4) on or after July 1, 2006, and that was disbursed before July 1, 2010, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall be at an annual rate on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2) that is equal to the lesser of—
    - (A) the weighted average of the [interest](/usc/20/1066a.md?p=6) rates on the [loans](/usc/20/1066a.md?p=2) consolidated, rounded to the nearest higher one-eighth of 1 percent; or
    - (B) 8.25 percent.
  - (4) **Reduced rates for undergraduate subsidized loans—** Notwithstanding [subsection (h)](#h) and paragraph (1) of this subsection, with respect to any [loan](/usc/20/1066a.md?p=2) to an undergraduate student made, insured, or guaranteed under this part (other than a [loan](/usc/20/1066a.md?p=2) made pursuant to section [1078–2](/usc/20/1078–2.md), [1078–3](/usc/20/1078–3.md), or [1078–8](/usc/20/1078–8.md) of this title) for which the first disbursement is made on or after July 1, 2006, and before July 1, 2010, the applicable rate of [interest](/usc/20/1066a.md?p=6) shall be as follows:
    - (A) For a [loan](/usc/20/1066a.md?p=2) for which the first disbursement is made on or after July 1, 2006, and before July 1, 2008, 6.8 percent on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2).
    - (B) For a [loan](/usc/20/1066a.md?p=2) for which the first disbursement is made on or after July 1, 2008, and before July 1, 2009, 6.0 percent on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2).
    - (C) For a [loan](/usc/20/1066a.md?p=2) for which the first disbursement is made on or after July 1, 2009, and before July 1, 2010, 5.6 percent on the unpaid principal balance of the [loan](/usc/20/1066a.md?p=2).
- (m) **Lesser rates permitted—** Nothing in this section or [section 1078–3 of this title](/usc/20/1078–3.md) shall be construed to prohibit a [lender](/usc/20/1019.md?p=6) from charging a borrower [interest](/usc/20/1066a.md?p=6) at a rate less than the rate which is applicable under this part.
- (n) **Definitions—** For the purpose of subsections [(a)](#a) and [(d)](#d) of this section—
  - (1) the term “period of instruction” shall, at the discretion of the [lender](/usc/20/1019.md?p=6), be any [academic year](/usc/20/1088.md?p=a-2-A), semester, trimester, quarter, or other academic period; or shall be the period for which the [loan](/usc/20/1066a.md?p=2) is made as determined by the [institution of higher education](/usc/20/1001.md?p=a); and
  - (2) the term “period of enrollment” shall be the period for which the [loan](/usc/20/1066a.md?p=2) is made as determined by the [institution of higher education](/usc/20/1001.md?p=a) and shall coincide with academic terms such as [academic year](/usc/20/1088.md?p=a-2-A), semester, trimester, quarter, or other academic period as defined by such institution.

## Footnotes

[^1]: See References in Text note below.

## Source credit

(Pub. L. 89–329, title IV, § 427A, as added Pub. L. 99–498, title IV, § 402(a), Oct. 17, 1986, 100 Stat. 1364; amended Pub. L. 100–50, § 10(d)(1), June 3, 1987, 101 Stat. 342; Pub. L. 102–325, title IV, § 415, July 23, 1992, 106 Stat. 514; Pub. L. 103–66, title IV, § 4101, Aug. 10, 1993, 107 Stat. 364; Pub. L. 103–208, § 2(c)(5)–(10), Dec. 20, 1993, 107 Stat. 2461; Pub. L. 105–178, title VIII, § 8301(a)(1), June 9, 1998, 112 Stat. 496; Pub. L. 105–244, title IV, § 416(a)(1), Oct. 7, 1998, 112 Stat. 1679; Pub. L. 106–554, § 1(a)(1) [title III, § 318(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–49; Pub. L. 107–139, § 1(a)(1), (c), Feb. 8, 2002, 116 Stat. 8, 9; Pub. L. 109–171, title VIII, § 8006(a), Feb. 8, 2006, 120 Stat. 159; Pub. L. 110–84, title II, § 201(a)(1), Sept. 27, 2007, 121 Stat. 790; Pub. L. 111–152, title II, § 2203, Mar. 30, 2010, 124 Stat. 1074.)

## Notes

### Editorial Notes

### References in Text

Section 1078–1 of this title, referred to in subsecs. (c) to (e)(1), was repealed by Pub. L. 103–66, title IV, § 4047(b)–(d), Aug. 10, 1993, 107 Stat. 364, eff. July 1, 1994, except with respect to loans provided under that section as it existed prior to Aug. 10, 1993. Subsequently, a new section 1078–1, relating to voluntary flexible agreements with guaranty agencies, was enacted by Pub. L. 105–244, title IV, § 418, Oct. 7, 1998, 112 Stat. 1691.

### Codification

Amendments by section 2(c)(6)–(10) of Pub. L. 103–208 (which were effective as if included in Pub. L. 102–325) were executed to this section as amended by Pub. L. 102–325 and Pub. L. 103–66, to reflect the probable intent of Congress.

### Prior Provisions

A prior section 1077a, Pub. L. 89–329, title IV, § 427A, as added Pub. L. 96–374, title IV, § 415(a)(1), Oct. 3, 1980, 94 Stat. 1419; amended Pub. L. 97–35, title V, § 534(a)(1), Aug. 13, 1981, 95 Stat. 454; Pub. L. 98–79, § 5(a), (b)(1), Aug. 15, 1983, 97 Stat. 481, 482, prescribed applicable interest rates on loans, prior to the general revision of this part by Pub. L. 99–498.

### Amendments

2010—Subsec. (l). Pub. L. 111–152, § 2203(1), inserted “and before July 1, 2010” in heading.

Subsec. (l)(1), (2). Pub. L. 111–152, § 2203(2), (3), inserted “and before July 1, 2010,” after “July 1, 2006,”.

Subsec. (l)(3). Pub. L. 111–152, § 2203(4), inserted “and that was disbursed before July 1, 2010,” after “July 1, 2006,”.

Subsec. (l)(4). Pub. L. 111–152, § 2203(5)(A), substituted “July 1, 2010” for “July 1, 2012” in introductory provisions.

Subsec. (l)(4)(D), (E). Pub. L. 111–152, § 2203(5)(B), struck out subpars. (D) and (E) which read as follows:

“(D) For a loan for which the first disbursement is made on or after July 1, 2010, and before July 1, 2011, 4.5 percent on the unpaid principal balance of the loan.

“(E) For a loan for which the first disbursement is made on or after July 1, 2011, and before July 1, 2012, 3.4 percent on the unpaid principal balance of the loan.”

2007—Subsec. (l)(4). Pub. L. 110–84 added par. (4).

2006—Subsec. (l)(2). Pub. L. 109–171 substituted “8.5 percent” for “7.9 percent”.

2002—Subsec. (k). Pub. L. 107–139, § 1(c), substituted “2006” for “2003” in heading and “July 1, 2006,” for “July 1, 2003,” wherever appearing in text.

Subsecs. (l) to (n). Pub. L. 107–139, § 1(a)(1), added subsec. (l) and redesignated former subsecs. (l) and (m) as (m) and (n), respectively.

2000—Subsec. (c)(4)(B). Pub. L. 106–554 amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “For any 12-month period beginning on July 1 and ending on June 30, the rate determined under this subparagraph is determined on the preceding June 1 and is equal to—

“(i) the bond equivalent rate of 52-week Treasury bills auctioned at the final auction held prior to such June 1; plus

“(ii) 3.25 percent.”

1998—Subsec. (j). Pub. L. 105–178, § 8301(a)(1)(B), added subsec. (j). Former subsec. (j) redesignated (k).

Subsec. (k). Pub. L. 105–244, § 416(a)(1)(B), added subsec. (k). Former subsec. (k) redesignated (l).

Pub. L. 105–178, § 8301(a)(1)(A), redesignated subsec. (j) as (k). Former subsec. (k) redesignated (l).

Subsec. (l). Pub. L. 105–244, § 416(a)(1)(A), redesignated subsec. (k) as (l). Former subsec. (l) redesignated (m).

Pub. L. 105–178, § 8301(a)(1)(A), redesignated subsec. (k) as (l).

Subsec. (m). Pub. L. 105–244, § 416(a)(1)(A), redesignated subsec. (l) as (m).

1993—Subsec. (c)(4)(E). Pub. L. 103–66, § 4101(1), added subpar. (E).

Subsec. (e)(1). Pub. L. 103–208, § 2(c)(5), substituted “under section 1077, 1078, or 1078–8 of this title” for “under this part”.

Subsecs. (f) to (h). Pub. L. 103–66, § 4101(3), added subsecs. (f) to (h). Former subsecs. (f) to (h) redesignated (i) to (k), respectively.

Subsec. (i). Pub. L. 103–66, § 4101(2), redesignated subsec. (f) as (i).

Subsec. (i)(1)(B). Pub. L. 103–208, § 2(c)(6), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “by crediting the excess interest to the reduction of principal to the extent provided for under paragraph (5) of this subsection.” See Codification note above.

Subsec. (i)(2)(B). Pub. L. 103–208, § 2(c)(7), substituted “average daily principal balance” for “outstanding principal balance” and “during” for “at the end of”. See Codification note above.

Subsec. (i)(4)(B). Pub. L. 103–208, § 2(c)(8), substituted “average daily principal balance” for “outstanding principal balance” and “during” for “at the end of”. See Codification note above.

Subsec. (i)(5). Pub. L. 103–208, § 2(c)(9)(A)(i), (B), substituted “paragraphs (2) and (4)” for “paragraph (2)” in first sentence and inserted “, but the excess interest shall be calculated and credited to the Secretary” after “required payment on the loan” in second sentence. See Codification note above.

Pub. L. 103–208, § 2(c)(9)(A)(ii), which directed substitution of “principal” for “principle” in first sentence, could not be executed because the word “principle” does not appear in text.

Subsec. (i)(7). Pub. L. 103–208, § 2(c)(10), added par. (7). See Codification note above.

Subsecs. (j), (k). Pub. L. 103–66, § 4101(2), redesignated subsecs. (g) and (h) as (j) and (k), respectively.

1992—Subsec. (c)(4)(D). Pub. L. 102–325, § 415(a), added subpar. (D).

Subsec. (e). Pub. L. 102–325, § 415(c)(2), added subsec. (e). Former subsec. (e) redesignated (f).

Pub. L. 102–325, § 415(b), amended par. (1) heading and substituted “paragraph (5)” for “paragraph (3)” in par. (1)(B), amended par. (2) heading, added pars. (3) and (4), redesignated former par. (3) as (5), struck out “or” before “by reducing the number” and inserted “, or by reducing the amount of the final payment of the loan. Nothing in this paragraph shall be construed to require the lender to make additional disclosures pursuant to section 1083(b) of this title” before period at end, redesignated former par. (4) as (6), and struck out former par. (5) which provided for study of treatment of excess interest payments provisions.

Subsecs. (f) to (h). Pub. L. 102–325, § 415(c)(1), redesignated subsecs. (e) to (g) as (f) to (h), respectively.

1987—Subsec. (c)(4)(A). Pub. L. 100–50, § 10(d)(1)(A), (B), substituted “and disbursed on or after July 1, 1987” for “to cover the cost of instruction for any period of enrollment beginning on or after July 1, 1987” and “any 12-month period beginning on or after July 1 and ending on June 30” for “any calendar year”.

Subsec. (c)(4)(B). Pub. L. 100–50, § 10(d)(1)(C), added subpar. (B) and struck out former subpar. (B) which read as follows: “For any calendar year, the rate determined under this subparagraph is determined on December 15 preceding such calendar year and is equal to—

“(i) the average of the bond equivalent rates of 91-day Treasury bills auctioned during the 12 months ending on November 30 preceding such calendar year; plus

“(ii) 3.75 percent.”

### Statutory Notes and Related Subsidiaries

### Effective Date of 2007 Amendment

Amendment by Pub. L. 110–84 effective Oct. 1, 2007, see section 1(c) of Pub. L. 110–84, set out as a note under section 1070a of this title.

### Effective Date of 2006 Amendment

Amendment by Pub. L. 109–171 effective July 1, 2006, except as otherwise provided, see section 8001(c) of Pub. L. 109–171, set out as a note under section 1002 of this title.

### Effective Date of 1998 Amendment

Pub. L. 105–244, title IV, § 416(c), Oct. 7, 1998, 112 Stat. 1682, provided that: “The amendments made by this section [amending this section and sections 1078–2, 1078–3, and 1087–1 of this title] shall apply with respect to any loan made, insured, or guaranteed under part B of title IV of the Higher Education Act of 1965 [20 U.S.C. 1071 et seq.] for which the first disbursement is made on or after October 1, 1998, and before July 1, 2003, except that such amendments shall apply with respect to any loan made under section 428C of such Act [20 U.S.C. 1078–3] for which the application is received by an eligible lender on or after October 1, 1998, and before July 1, 2003.”

### Effective Date of 1993 Amendment

Amendment by section 2(c)(5) of Pub. L. 103–208 effective on and after Dec. 20, 1993, and amendment by section 2(c)(6)–(10) of Pub. L. 103–208 effective, except as otherwise provided, as if included in the Higher Education Amendments of 1992, Pub. L. 102–325, see section 5(a), (b)(2) of Pub. L. 103–208, set out as a note under section 1051 of this title.

### Effective Date of 1987 Amendment

Amendment by Pub. L. 100–50 effective as if enacted as part of the Higher Education Amendments of 1986, Pub. L. 99–498, see section 27 of Pub. L. 100–50, set out as a note under section 1001 of this title.