If you’ve exhausted all other avenues toward paying for college — a laundry list that includes saving up, raising money and applying for gift aid like grants and scholarships — you have every right to be tracking student loan interest rates. They have the most direct effect on the cost of student loan repayment.
While federal loans come with uniform annual percentage rates (APRs), private loan interest rates vary by the strength of your credit or — for teens and 20-somethings with thin credit files — that of your cosigner. Here’s how student loan rates are trending for new borrowers and current loan-holders considering refinancing their education debt.
Methodology
The student loan interest rates listed above are averages among borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender between the start and end dates of the most recent week.
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Featured Offer
College Ave Student Loans
APRs
6.99% to 13.99% (fixed), 6.99% to 13.99% (variable)
Minimum credit score
Mid-600s
Repayment terms
5 to 20 years
Current private student loan interest rates
The average student loan interest rate for 5-year variable terms is 8.54%, and the average for 10-year fixed terms is 8.14%.
Lenders offering the best private student loans typically advertise “basem*nt” and “ceiling” annual percentage rates (APRs). These ranges show the spectrum of available rates, with the lowest APRs available to most creditworthy applicants (and vice versa). It’s wise to compare APRs — not simple interest rates — when you shop around since they account for lender fees and offer a more complete comparison.
Below are the average student loan rates for various credit profiles:
Student loan interest rates for refinancing in May 2024
The best student loan refinancing lenders offer fixed and variable interest rates, though (as with other loans) it’s wise to compare APRs when shopping around. APRs account for both the simple interest rate and any lender fees. Lenders may also advertise APRs that include discounts, such as 0.25 percentage points off for enrolling in automatic payments. (Although private lenders typically allow you to refinance federal loans, think twice before doing so, as it will irreversibly strip your federal loans of their government-exclusive protections.)
Today’s average student loan refinancing rate for 5-year variable terms is 6.80%, and the average for 10-year fixed terms is 7.23%. Here’s how rates for these terms adjust by credit band:
Federal loan rates for the 2023-2024 academic year
Undergraduate borrowers qualify for the lowest rates at 5.50% for the 2023-2024 academic year. These fixed rates influence the size of your monthly payments and total costs over the life of the loan.
| Loan | Borrower | Rate* | Fees* |
|---|---|---|---|
Direct subsidized, unsubsidized | Undergraduates | 5.50% | 1.057% |
Direct unsubsidized | Graduate or professional students | 7.05% | 1.057% |
Direct PLUS | Graduate or professional students, parents | 8.05% | 4.228% |
Source: Credible *Rates and fees for the 2023-2024 academic year.
How are federal loan rates determined?
Congress sets federal student loan rates annually based on the high-yield value of 10-year Treasury notes. The rates are fixed, meaning they won’t change over time.
Notably, unlike private loan rates, federal loan rates aren’t dependent on credit, though federal Direct PLUS Loans may have a credit check as part of qualifying. Federal loans are one-size-fits-all, and credit isn’t a factor in determining the rate you’ll get or your eligibility.
Student loans 101
Federal loans and private loans are the main ways of borrowing for the rising cost of college.
The US government offers federal loans with some important advantages over private loans. Typically, no credit is necessary to qualify, interest rates are fixed and there’s plenty of repayment flexibility.
Borrowers with federal loans can reduce monthly payments through income-driven repayment (IDR) programs, like the SAVE plan, and may qualify for student loan forgiveness. There are also options to temporarily suspend payments through deferment and forbearance.
Financial institutions and online lenders offer private loans. Generally, private loans should be a last resort after taking advantage of grants, scholarships and federal loans. Private lenders review your credit as part of the approval process and to determine interest rates. Unlike federal loans, private loan rates can be fixed or variable.
Repayment options aren’t standardized with private loans and vary by lender. Some lenders may offer deferment options, but income-based options and forgiveness are rarely an option for private loan borrowers.
| Federal loans | Private loans | |
|---|---|---|
How rates are determined | Congress | The economic environment and individual borrowers’ credit |
Rates available | Fixed | Fixed or variable |
Eligibility | No credit necessary (except for Direct PLUS Loans) | Based on credit history and may require an eligible cosigner |
Repayment flexibility | Deferment, forbearance, IDR options and student loan forgiveness available | Limited and varies by lender |
Types of federal loans
The US Department of Education offers different types of federal student loans. While federal loan offerings have changed over the years (FFEL and Perkins loans are obsolete), today’s borrowers have the following options:
- Direct subsidized loans: These loans are exclusively available to undergraduate students with financial need. The government subsidizes the interest for subsidized loan borrowers while they’re in school at least half-time, during the grace period and deferment.
- Direct unsubsidized loans: These are available to undergraduate and graduate borrowers, regardless of financial need. Unsubsidized Loan borrowers don’t qualify for interest subsidies and must pay all the interest that accrues. If you’re wondering when interest charges begin, it’s as soon as the loan is disbursed.
- Direct PLUS Loans: These loans are offered to eligible graduate students (Grad PLUS loans) or parents of undergraduate students (Parent PLUS loans). Unlike most federal loans, there’s a credit check requirement for PLUS loans. If you have an adverse credit history, such as a bankruptcy or loan default, a cosigner-like endorser is typically required.
Direct consolidation loans: Borrowers can combine multiple federal loans into one through a direct consolidation loan. This can simplify repayment by having one monthly payment and one loan servicer.
Types of private loans
The types of private student loans available vary by lender but may include:
- Undergraduate loans: These private loans are available to undergraduates and may require a cosigner who’s responsible for the loan if it’s delinquent or in default.
- Graduate loans: Private lenders may offer graduate loans to borrowers attending grad school.
- Degree-based loans: Some private lenders offer degree-based loans to borrowers going to law, medical or dental school.
- Career loans: These loans are designed for borrowers pursuing professional training or trade certificates.
- Parent loans: Private lenders may also offer private parent loans to borrowers who want to finance their child’s education.
- Refinancing loans: Refinancing loans are used to consolidate and change the terms — and ideally lower the interest rate on — of private and federal student loans. The student loan refinancing loan pays off the existing loans and offers a different interest rate and repayment terms. Refinancing federal loans is risky business since it means forfeiting the original loans’ government-exclusive repayment protections.
How does student loan repayment work?
When you borrow a student loan, you’re typically required to start repayment after your six-month grace period (though making in-school payments is smart since it halts interest from accruing). The grace period typically begins after graduation or if you leave school.
Borrowers make monthly payments to the loan servicer assigned by the federal government or their private lender. Monthly payments are based on several factors:
- Loan amount
- Interest rate
- Repayment plan
Federal loans default to the standard repayment plan. This has the shortest repayment term (10 years) and is the most straightforward way to repay your federal loans.
Example: A borrower with $75,000 in student loans with an average interest rate of 6% on the Standard Repayment Plan would pay $833 per month. The amount of interest paid during repayment would be $24,918. The total cost over the life of the loan — with principal and interest — would be $99,918, as a student loan calculator (like Calculator.net’s) can attest.
How to calculate your student loan interest
Since student loan interest can accrue daily, it can add up quickly. To calculate your loan’s interest:
- Calculate the interest rate factor. Take your interest rate and divide it by 365, or the number of days in a year.
- Find out daily interest. Take the number in the first step and multiply it by your current principal balance to get the daily interest amount.
- Determine monthly interest charges. Use the daily interest amount and multiply it by the number of days between monthly payments.
Example: Let’s assume a borrower has $35,000 in student loans with an interest rate of 5.50% (or .055).
- .055 (interest rate) / 365 = .00015
- .00015 (interest rate factor) x $35,000 (principal balance) = $5.27 (daily interest)
- $5.27 (daily interest) x 30 (number of days between payments) = $158.21 (monthly interest charges)
You can follow these steps to calculate the interest on your education debt. You can also use a free, online student loan interest calculator to simplify the process.
Frequently asked questions (FAQs)
Federal loan interest rates are set annually by Congress and are the same for every borrower. Like with private loan rates, though, you might be able to reduce your federal loan rate by 0.25 percentage points by enrolling in automatic payments. The best way to get a lower interest rate on private loans is to focus on improving your credit or getting a qualified cosigner.
When you make a student loan payment, part of it goes toward the principal balance (the amount you originally borrowed), and another portion goes toward paying off the accrued interest. So, a higher rate results in higher monthly payments. At the same time, the lower the rate, the less you’ll pay each month in interest and the less you’ll pay overall.
Federal student loan rates are fixed and set annually by Congress, so they can change from year to year — but the rate will remain in effect as long as the loan is in repayment. For private student loans, you’ll be assigned an interest rate that can be fixed or variable — in the latter case, it may change monthly or quarterly, depending on how your loan contract is written.
Try to get a qualified cosigner to join your private loan application. If you were to stop making payments on the loan, the cosigner takes on that responsibility, so it’s less risky for the lender.
Melanie Lockert and Devon Delfino contributed to this article
Fact checked additionally by Emily Mcnu*tt
