The interest rate on Direct Unsubsidized Loans is a fixed rate of 6.8%.
If you qualify under the Servicemembers Civil Relief Act, the interest rate on loans you obtained prior to military service may be limited to 6% during your military service. If you believe that you are eligible for this benefit, contact your Federal Loan servicer for information about the documentation you must provide.
Payment of Interest
Except as explained below for certain military service members, interest is charged on a TEACH Grant that is converted to a Direct Unsubsidized Loan during all periods (starting on the date of the first and each subsequent disbursement of the TEACH Grant), including deferment and forbearance periods.
- At the time your TEACH Grant is converted to a loan, you will be given the opportunity to pay the interest that accrued. If you do not pay this interest, it will be capitalized (see below) when the loan enters repayment at the end of the six-month grace period.
- You will also be given the opportunity to pay the interest that accrues during deferment, forbearance, or other periods as provided under the laws and regulations that apply to Direct Unsubsidized Loans. If you do not pay this interest, it will be capitalized at the end of the deferment, forbearance, or other period.
If you are serving on active duty in the military, interest will not be charged on Direct Loans first disbursed on or after October 1, 2008 during periods of qualifying active duty military service (for up to 60 months).
Capitalization is the addition of unpaid interest to your loan principal.
- Capitalization increases the unpaid principal of your loan, and interest will then be charged on the higher principal balance.
- This means that you will pay more interest over the life of your loan.