What Is a Good Student Loan Rate? A Guide to Choosing the Right Loan

A lower interest rate can make a big difference in how much you pay for student loans. While borrowing less is the best way to keep costs down, the rate you get also affects the total amount you owe. A higher rate means owing more interest over time.

So, what counts as a good student loan interest rate? It depends on the type of loan you're applying for and your financial profile. Here's what to consider when evaluating an interest rate offer.

What is a good student loan interest rate?

A good private student loan rate depends on your credit history, loan terms, and lender. However, comparing your offer to current federal rates can help you determine if it's competitive. Federal loans have minimal credit requirements, so if you qualify for a private student loan with a lower rate, you're likely getting a good deal.

“Interest rate really depends on the loan terms and credit, but a good benchmark to compare against is the grad PLUS or parent PLUS loan rate,” advises Jack Wang, a wealth adviser with Innovative Advisory Group who specializes in college financial planning.

For the 2024-25 academic year, federal PLUS loans have a fixed interest rate of 9.08%. If the rate you're offered is close to the federal benchmarks, you're likely getting a good interest rate.

Current interest rates for student loans

Knowing the current average rates helps when comparing loan options. Here are the federal and private student loan rates.

Current private student loan rates

Current federal student loan rates

Federal student loan interest rates are set by Congress and apply to all borrowers taking out loans for the same academic year. These rates change annually but remain fixed for the life of the loan once disbursed.

Here are the interest rates for loans disbursed between July 1, 2024, and July 1, 2025:

Comparing federal vs. private student loan rates

Federal and private student loan rates are determined differently:

• Federal student loan rates are set by Congress and apply to all borrowers taking out the same type of loan in a given academic year. Your rate won't change based on your credit or financial situation, and you can't lower it by shopping around. All federal loans have fixed rates, meaning the rate stays the same for the life of the loan.
• Private student loan rates are set by individual lenders and can be fixed or variable. Your rate depends on factors like your credit score, income, loan term, and whether you have a cosigner. Since rates vary by lender, it's important to compare offers before choosing a loan.

To find the best private student loan rate, get prequalified with at least three lenders before applying. Prequalification gives you an estimated rate without affecting your credit score. If you're considering a variable-rate loan, be aware that while the rate may start lower, it can increase over time, raising your monthly payments.

Factors that affect interest rates

Federal student loan rates are set by Congress and only depend on the loan type and disbursement year. Private student loan rates, however, vary by lender and are influenced by several key factors:

• Your credit score: A higher score signals lower risk to lenders, which can help you qualify for a lower rate.
• Your income: Lenders want to see that you earn enough income to repay the debt. Some may even have minimum income requirements to qualify.
• Your debt-to-income (DTI) ratio: This compares how much debt you owe to how much you earn. A high DTI suggests a greater risk, which can lead to higher interest rates.
• Your repayment term length: Shorter repayment terms usually come with lower rates since lenders take on less risk over time.
• Whether you apply with a cosigner: Adding a cosigner with strong credit to your application can help you qualify for a lower rate since the lender has an additional person to collect from if needed.
• Market conditions: Market conditions, such as inflation and Federal Reserve interest rate changes, directly impact student loan rates by influencing lenders' borrowing costs.
• Whether you choose a fixed vs. variable rate: Fixed rates stay the same for the life of the loan, providing stability. Variable rates start lower but can increase over time, which means your payments can potentially increase.

Student loan rates by credit score

How to get the best student loan rate

However, the best way to keep costs reasonable is to try to get the best student loan rate you can. To do that:

• Apply for federal student loans first to take advantage of affordable fixed rates offered by the U.S. Department of Education.
• Take steps to improve your financial credentials such as boosting your income or credit score before applying for private loans.
• Ask a well-qualified friend or relative to cosign a private student loan with you. Make sure they understand the risks and responsibilities of cosigning a loan first.
• Choose the shortest repayment term that still allows you to comfortably afford the monthly payments.
• Research the best student loan companies and prequalify with multiple lenders to ensure you're offered the best possible rate.

Should I refinance to get a lower student loan rate?

In some cases, you can lower the interest rate on your existing student loans by refinancing.

“As rates come down, borrowers can look to refinance their loans in the event there is a larger difference,” says Clifford C. Cornell, a certified financial planner (CFP) and associate financial adviser with Bone Fide Wealth, LLC.

“Many took advantage of this after COVID, refinancing their student loans to much more attractive rates than they previously had,” adds Cornell.

The process of refinancing involves replacing your current loan with a new private loan, ideally at a lower rate. A lower rate can reduce borrowing costs and help more of your payment go toward the principal.

However, extending your repayment term could negate those savings. While a longer term can lower your monthly payments, it also means paying interest for more years, which could make your loan more expensive overall.

To figure out if refinancing is right for you:

• Refinance only private loans, or know the risks. If you refinance federal loans, you'll lose benefits like income-driven repayment and loan forgiveness options.
• Compare multiple lenders. Many student loan refinancing lenders offer prequalification, which allows you to check rates without affecting your credit.
• Consider both monthly payments and total costs over time. A lower rate can save you money, but look at how much you'll pay over time before making a decision.

Learn More: When Should You Refinance Student Loans?