Average Student Loan Interest Rates for Private and Federal Loans

Student loan interest rates have seen a notable increase in recent years as borrowing costs of all types climbed from historic lows during the height of the COVID-19 pandemic. Even still, student debt continues to rise. 

After mortgages, student loans are the second highest debt category for borrowers, which makes getting the best rate and choosing the right lender important. Interest rates impact the total repayment cost of the loan, so the lower the interest rate you can get, the better off you'll be after graduation.

Private student loan interest rates today

Student borrowers have two options for paying for college: federal and private loan lenders, each with its own benefits.

Federal interest rates for the 2024-25 school year are 6.53% for undergraduates, and 8.08% or 9.08% for graduate students, depending on the loan type you choose. The Department of Education issues federal student loans, with rates remaining stable during the academic year. Private loan rates, however, can fluctuate and are available from financial institutions like banks, credit unions, and online lenders.

Average private student loan rates

According to data compiled by Credible, during the week of March 31, the average interest for a five-year variable-rate private student loan for borrowers with credit scores of 720 or better was 8.66%, up from 7.09% a week earlier. For 10-year fixed private student loans, the average interest rate was 10.84%, compared with 6.19% the prior week.

Understanding student loan rates

In simple terms, interest is the extra amount you pay to a lender (private and federal) for borrowing money. It's calculated as a percentage of the remaining principal balance.

Private student loan interest rates are often lower than federal rates, but approval for the lowest rates requires excellent credit. Each lender has qualification requirements, and rates vary depending on the borrower's credit score and other factors.

There are no credit score requirements, and rates are the same for all federal student loan borrowers.

However, not everyone is eligible for federal student loans. Those who are may reach their borrowing limits without having enough to cover their education costs. In these cases, private student loans can bridge the gap. Interest rates on private student loans are influenced by the borrower's or cosigner's credit score, income, and loan term.

Every lender has its own method for evaluating borrowers, so it's a good idea to request private student loan rates from multiple lenders and compare your options. You can compare rates from various lenders through Credible without affecting your credit score.

What is a good interest rate on a private student loan?

A “good” interest rate is typically below 8% on fixed-rate loans or below 7% on variable-rate loans. Variable interest rates are calculated using this daily interest formula:

Interest Amount = (Outstanding Principal Balance x Interest Rate Factor) x Number of Days Since Last Payment

Sometimes, private student loan lenders can offer rates below federal rates. But it's hard to qualify for those rates, especially for borrowers with bad credit or recent high school graduates with little credit history. Even a 1% interest rate change can be the difference between paying hundreds of dollars more by the time the loan is fully repaid.

Interest rates are determined by several factors, including your credit score and market conditions. Private student loan lenders offer fixed rates, ranging from 3.39% to 17.99% and most offer variable rates, ranging from 4.13% to 18.51%. If you have a well-qualified cosigner, the rates can be even lower.

For existing borrowers with fixed-rate private student loans, Fed rate changes won't affect your current loan interest since the rate is locked in. Student borrowers who have variable-rate private loans, any Fed rate change will likely affect your interest rates over time, meaning you could end up paying more — or less — interest over the life of the loan. If you're a new borrower, private student loan interest rates can be higher or lower, depending on the Fed rates when you apply for a loan.

How to get the best interest rate on private student loans

Some private loan lenders offer rate reduction options like when you enroll in automatic payments, which can save as much as 0.25% off your current rate. If you qualify for a private student loan, the interest rate you're offered depends on these factors:

Credit score

One of the most significant factors determining your student loan interest rate is your credit score and credit report. Your credit score doesn't affect federal loans for undergraduates because rates are the same for every borrower, so you should always apply for those first. For private loan lenders, it's a different story. While some have a required minimum credit score, most don't — or at least they aren't always advertising them.

The often hard-to-achieve “excellent” credit score (750+) will get the best and lowest interest rates from private loan lenders, followed by “good” credit scores (700 to 749). Most private lenders prefer you have a “fair” credit score of at least 670 to be eligible for student loans. Consider adding a cosigner to your application if you have weak or limited credit. This can help you get approved or at least qualify for better rates than you will when applying alone.

Debt-to-income ratio (DTI)

Your debt-to-income ratio (DTI) represents how much of your monthly income goes to paying off your debt. The lower your DTI, the lower the interest rates you can likely qualify for. Although ratios vary, a preferable DTI is at or under 40%.

Fixed or variable interest rates

Fixed rates stay the same over the life of your loan, while variables fluctuate with changing market conditions. It's common for variable rates to start out lower than fixed ones, but it's possible that variable rates could increase in the future, making your loan more expensive. When you don't want to gamble with variable rates, lock in your rate with a fixed-rate loan.

Loan repayment term

Repayment terms range from five to 20 years, depending on the private lender. Lenders typically view longer-term loans as riskier. That means you may get a lower interest rate if you agree to pay off your loan more quickly. Note that this will make your monthly payments higher than a longer loan term would.

Federal student loan interest rates

Approximately 42.7 million student borrowers have federal loan debt, according to the most recent information from the Education Data Initiative.

While federal rate changes can significantly affect the cost of private student loans, federal student loans are generally more stable. Federal student loan interest rates are always fixed and are determined by Congress annually on July 1. The rates apply to student loans disbursed between July 1 and June 30 of the following academic year.

From 2020-21 to 2024-25, federal student loan interest rates increased by 137.5% for undergraduates. These are the current federal rates for the 2024-25 school year and how they compare to the prior years:

What affects federal student loan interest rates?

Congress sets federal student loan rates using the 10-year U.S. Treasury note as a guide. Economic conditions, like inflation, unemployment, and policy changes influence these rates.

When you take out a federal student loan, you must choose between a subsidized or unsubsidized. For subsidized loans, the government pays the accrued interest while you're in school or during your grace period, saving you a lot over time. Unsubsidized loan interest begins accruing as soon as the loan is disbursed, meaning the unpaid interest is added to your loan balance and can make the cost of the loan increase even quicker.

Interest rates on different types of federal student loans

The federal government offers Direct Subsidized and Direct Unsubsidized loans to undergraduates. The current fixed interest rate is 6.53%.

Federal Direct PLUS Loans offer graduate and professional students funding to cover educational expenses not met by other financial aid options. These loans are available to eligible students who are enrolled in at least half-time at schools that participate in the Direct Loan Program. PLUS loan amounts are limited to the cost of attendance, less other financial assistance you receive.

Student borrowers will get an automatic deferment while enrolled in school at least half-time, and for an additional six months after graduating, leaving school, or dropping below half-time enrollment. However, if you have unsubsidized loans, interest continues to accrue during these periods. You'll have anywhere from 10 to 25 years to repay your loan, depending on your repayment plan.

Be aware that every Direct PLUS loan incurs a loan fee — a percentage of the loan amount that will be deducted from each loan disbursement. The percentage for all Direct PLUS loans disbursed on or after Oct. 1, 2020, is 4.228%.

Direct subsidized and unsubsidized loan interest rate

Through July 1, 2025, the interest rate for direct subsidized and unsubsidized loans is 6.53% for undergraduate students. The federal loan fee is currently 1.057% for these types of loans taken out before Oct. 1.

Direct unsubsidized loan interest rate

Different from direct unsubsidized loans for undergraduates, graduate and professional students who opt for the government's direct unsubsidized loan option, your current fixed interest rate is 8.08% for student loans disbursed before July 1, plus a fixed add-on percentage of 4.228% until Oct. 1.

Grad PLUS loan interest rate

Federal grad PLUS loans have a fixed interest rate for the life of the loan. The current interest rate is 9.08% through July 1, plus a 4.228% add-on fee until Oct. 1.

Parent PLUS loan interest rates

Just like grad PLUS loans, parent PLUS loans have a fixed interest rate for the duration of the loan. The current interest rate is 9.08% until July 1, and the 4.228% add-on fee until Oct. 1.