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The Federal Reserve raised its benchmark rate by a quarter percentage point for the second time this year on May 4, 2022. The last increase was on March 16. The rate will now range from 0.75% to 1%.

With federal student loan payments set to resume on Aug. 31, 2022, and the Fed expected to raise the rate again multiple times this year, you might be wondering how the rate hikes will affect your student loans.

Here’s what you should know about how these higher interest rates affect student loans (and how to minimize the potential impact on your loans):

Why the Fed raises rates

The Federal Reserve is responsible for guiding the overall health of the American economy — which includes employment, price stability, and interest rates. When one or more aspects of this complex financial system fall out of balance, it’s the Fed’s job to get things back on track. The federal funds rate is one tool the Fed uses to do this.

This most recent rate increase — and the ones that will likely follow this year — is largely an attempt to put the brakes on inflation.

Keep in mind: The federal funds rate is the interest rate banks charge each other when lending money to other banks overnight. It also acts as a guide for other interest rates — so when the federal funds rate increases, other rates (like mortgage rates) usually do, too.

How does the Federal Reserve rate hike affect federal student loan interest?

All federal student loans taken out in 2006 or later have fixed interest rates — meaning your rate and payment will stay the same throughout the life of your loan. Congress sets these rates each year based on 10-year Treasury notes.

Unless you have a variable-rate federal loan originated before July 1, 2006, the federal funds rate increase won’t affect your loans.

Keep in mind: The only way to change the rate on federal loans is to refinance them. However, refinancing federal loans will cost you access to federal benefits and protections — such as income-driven repayment plans and student loan forgiveness programs.

Here are the federal student loan interest rates for the 2021-2022 academic year:

  • Direct Subsidized Loans: 3.73%
  • Direct Unsubsidized Loans (undergraduate): 3.73%
  • Direct Unsubsidized Loans (graduate and professional): 5.28%
  • Direct PLUS Loans: 6.28%

These rates will apply to any federal loans taken out before July 1, 2022. However, if you need to take out additional federal student loans afterward, you’ll likely end up paying a higher interest rate due to the fed rate increase.

The new rates for the upcoming academic year will be set in May 2022 based on the next 10-year Treasury note auction — this is where the Fed’s rate hike will have an indirect impact on student loan rates.

Tip: If you need to pay for school, it’s a good idea to rely on aid you don’t have to repay first, such as scholarships, grants, and other federal financial aid. If you still need additional funds, it’s usually best to take out federal student loans — mainly because they come with federal benefits and protections.

After you’ve exhausted your scholarship, grant, and federal student loan options, private student loans could help fill any financial gaps left over.

Find out your loan score

If you’re wondering how competitive your loan is, the loan score tool below can help. Just enter your APR, credit score, monthly payment, and remaining balance (estimates are fine) to see how your loan stacks up.

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How does the Federal Reserve rate hike affect private student loan interest?

Unlike with federal loans, private lenders set the rates on private student loans according to market conditions. Additionally, private loans can come with fixed or variable rates. While a fixed rate will stay the same throughout the life of the loan, a variable rate can fluctuate over time.

If you have a fixed-rate private student loan, the Fed’s rate hike won’t affect your interest rate. But if you have a variable-rate loan, you could see your interest rate increase.

Keep in mind: If you need to take out a private student loan, the increase in the federal funds rate will affect the interest rate on your new loan.

How to deal with the new Fed rate changes

If you already have federal or private student loans with fixed interest rates and aren’t struggling to repay them, you probably don’t need to take any big steps. The rate hike won’t affect these fixed rates — though it will likely increase any other borrowing costs you might have, such as new auto loans or credit cards.

Additionally, if you have a variable-rate private student loan, it’s a good idea to look at your loan contract to see how your rate is set. Private lenders have long used the London Interbank Offered Rate (LIBOR) as a reference for their rates — however, regulators have directed lenders to phase out this index by June 2023.

Tip: The Fed has indicated that it will likely raise the federal funds rate again multiple times in 2022. If you have a variable-rate private loan, it might be a good idea to refinance it into a fixed-rate loan to avoid any potential costs that could come with rate fluctuations.

Depending on your credit, refinancing might get you a lower interest rate on your loans — which could save you money on interest and potentially help you pay off your loans faster.

You can use our calculator below to see how much you can save by refinancing your student loans.

Step 1. Enter your loan balance

? Enter the remaining amount of the loans you’d like to refinance $

Step 2. Enter current loan information

? Enter the average annual interest rate of the loans you’d like to refinance %
? Enter the monthly amount you currently pay on your loans (or enter remaining term) $
? Enter the amount of time left to repay your loan (or enter monthly payment) years

Step 3. Enter your new loan information to start calculating your savings

? Enter an estimated new interest rate. %
? Enter the monthly amount to pay on your new loan (or enter new loan term) $
? Enter the amount of time you have to repay your loan (or enter monthly payment) years
Lifetime Savings Increased Lifetime Cost $
New Monthly Payment $
Monthly Savings Increased Monthly Cost $

If you refinance your student loan at % interest rate, you can save will pay an additional $ monthly and pay off your loan by . The total cost of the new loan will be $.

When to refinance your student loans

Student loan refinancing is the process of paying off your old loans with a new private loan — leaving you with just one loan and payment to manage. However, while refinancing could be a good idea in some cases, it isn’t right for everyone.

If you’re thinking about refinancing, here are a few situations when refinancing could be worth it:

  • You can qualify for a lower interest rate. Depending on your credit, you might be able to get a lower interest rate through refinancing and reduce your overall costs. Keep in mind that you’ll typically need good to excellent credit to qualify for the lowest rates — a good credit score is usually considered to be 700 or higher. In general, the higher your credit score, the better your rate will likely be.
  • You want a lower monthly payment. If you opt to extend your repayment term through refinancing, you could reduce your monthly payments and lessen the strain on your budget. However, keep in mind that choosing a longer term also means you’ll pay more in interest over time.
  • You want a fixed interest rate. If you have a variable interest rate loan, you can switch to a fixed rate through refinancing. With a fixed-rate loan, you won’t have to worry about your rate or payment changing in the future — such as with the increase in the federal funds rate.
  • You want to remove a cosigner. Many private lenders provide a cosigner release option — meaning you can remove a cosigner from the loan. To qualify, you’ll typically have to make a certain number of consecutive, on-time payments, and you’ll have to meet the underwriting criteria on your own. Another way to remove a cosigner from a loan is through refinancing, which could be helpful if you’d like to remove your cosigner soon or your lender doesn’t offer cosigner release.
Keep in mind: Remember that while you can refinance both federal and private loans, refinancing federal student loans will cost you access to federal benefits and protections. For example, you’ll no longer be eligible for IDR plans or student loan forgiveness programs.

If you decide to refinance your student loans, be sure to take the time to shop around and consider your options from as many lenders as possible. This way, you can find the right loan for your situation.

Credible makes this easy — you can compare your prequalified rates from our partner lenders in the table below in two minutes.

LenderFixed rates from (APR)Variable rates from (APR)Loan terms (years)Loan amounts


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
2.94%+ N/A10, 15, 20$7,500 up to up to $200,000
(larger balances require special approval)
  • Fixed APR: 2.94%+
  • Variable APR: N/A
  • Min. credit score: Does not disclose
  • Loan amount: $7,500 up to $500,000
  • Loan terms (years): 10, 15, 20
  • Max. undergraduate loan balance: $250,000 - $500,000
  • Time to fund: 4 months
  • Repayment options: Immediate repayment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Must be a resident of Kentucky
  • Customer service: Phone
  • Soft credit check: No
  • Cosigner release: After 12 months
  • Loan servicer: Kentucky Higher Education Student Loan Corporation
  • Max. graduate loan balance: $250,000 - $500,000
  • Credible Review: Advantage Education Loan review
  • Offers Parent PLUS Refinancing : Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
2.35%+ 2.45%+ 5, 7, 10, 15, 20$10,000 up to $250,000
(depending on degree)
  • Fixed APR: 2.35%+
  • Variable APR: N/A
  • Min. credit score: Does not disclose
  • Loan amount: $10,000 to $400,000
  • Loan terms (years): 5, 7, 10, 15, 20
  • Repayment options: Military deferment, forbearance
  • Fees: Late fee
  • Discounts: Autopay
  • Eligibility: Must have a credit score of at least 720, a minimum income of $60,000, and must be a resident of Texas
  • Customer service: Email, phone
  • Soft credit check: Does not disclose
  • Cosigner release: No
  • Loan servicer: Firstmark Services
  • Max. Undergraduate Loan Balance: $100,000 - $149,000
  • Max. Graduate Loan Balance: $200,000 - $400,000
  • Offers Parent PLUS Refinancing: Does not disclose


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
3.74%+1 1.99%+1 5, 7, 10, 15, 20$10,000 to $500,000
(depending on degree and loan type)
  • Fixed APR: 3.74%+1
  • Variable APR: 1.99%+1
  • Min. credit score: Does not disclose
  • Loan amount: $10,000 to $750,000
  • Loan terms (years): 5, 7, 10, 15, 20
  • Repayment options: Immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay, loyalty
  • Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans
  • Customer service: Email, phone, chat
  • Soft credit check: Yes
  • Cosigner release: After 24 to 36 months
  • Loan servicer: Firstmark Services
  • Max. Undergraduate Loan Balance: $100,000 to $149,000
  • Max. Graduate Loan Balance: Less than $150,000
  • Offers Parent PLUS Refinancing: Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
3.49%+2 3.44%+2 5, 7, 10, 12, 15, 20$5,000 to $300,000
(depending on degree type)
  • Fixed APR: 3.49%+2
  • Variable APR: 3.44%+2
  • Min. credit score: Does not disclose
  • Loan amount: $5,000 to $300,000
  • Loan terms (years): 5, 7, 10, 12, 15
  • Repayment options: Military deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay
  • Eligibility: All states except for ME
  • Customer service: Email, phone, chat
  • Soft credit check: Yes
  • Cosigner release: After 24 to 36 months
  • Loan servicer: College Ave Servicing LLC
  • Max. Undergraduate Loan Balance: $100,000 to $149,000
  • Max. Graduate Loan Balance: Less than $300,000
  • Offers Parent PLUS Refinancing: Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
3.41%+5 3.46%+5 5, 10, 15, 20$1,000 to $250,000
  • Fixed APR: 3.41%+5
  • Variable APR: 3.46%+5
  • Min. credit score: 700
  • Loan amount: $7,500 to $200,000
  • Loan terms (years): 5, 10, 15, 20
  • Repayment options: Immediate repayment, academic deferment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Must be a U.S. citizen or permanent resident and submit two personal references
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 36 months
  • Loan servicer: Granite State Management & Resources (GSM&R)
  • Max. Undergraduate Loan Balance: $150,000 to $249,000
  • Max. Graduate Loan Balance: $150,000 to $199,000
  • Offers Parent PLUS Refinancing : Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
2.73%+3 1.86%+3 5, 7, 10, 12, 15, 20$15,000 to $250,000
  • Fixed APR: 2.73%+3
  • Variable APR: 1.86%+3
  • Min. credit score: 680
  • Loan amount: $15,000 to $250,000
  • Loan terms (years): 5, 7, 10, 12, 15, 20
  • Repayment options: Forbearance
  • Fees: None
  • Discounts: None
  • Eligibility: Must be a U.S. citizen or permanent resident, have at least $15,000 in student loan debt, and have a bachelor’s degree or higher from an approved school
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: No
  • Loan servicer: Mohela
  • Max. Undergraduate Loan Balance: $250,000
  • Max. Graduate Loan Balance: $250,000
  • Offers Parent PLUS Refinancing: Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
3.47%+4 2.45%+4 5, 10, 15, 20$5,000 - $250,000
  • Fixed APR: 3.47%+4
  • Variable APR: 2.45%+4
  • Min. credit score: 670
  • Loan amount: $5,000 to $250,000
  • Loan terms (years): 5, 10, 15, 20
  • Repayment options: Academic deferment, military deferment, forbearance
  • Fees: Late fee
  • Discounts: Autopay
  • Eligibility: Must be U.S. citizen or permanent resident
  • Customer service: Email, phone, chat
  • Soft credit check: Yes
  • Cosigner release: Yes
  • Max undergraduate loan balance: $250,000
  • Max graduate loan balance: $250,000
  • Offers Parent PLUS refinancing: Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.44%+ 7N/A5, 7, 10, 12, 15, 20Up to $300,000
  • Fixed APR: 4.44%+ 7
  • Variable APR: N/A
  • Min. credit score: 670
  • Loan amount: Up to $300,000
  • Loan terms (years): 5, 7, 10, 15, 20
  • Time to fund: Usually one business day
  • Repayment options: Academic deferral, military deferral, forbearance, death/disability discharge
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all 50 states
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 24 months
  • Max. undergraduate loan balance: $300,000
  • Max. graduate balance: $300,000
  • Offers Parent PLUS loans: Yes
  • Min. income: None


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
2.69%+ 2.14%+ 5, 7, 10, 15Up to $300,000
  • Fixed APR: 2.69%+
  • Variable APR: 2.14%+
  • Min. credit score: 700
  • Loan amount: $5,000 to $300,000
  • Loan terms (years): 5, 7, 10, 15
  • Max. undergraduate Loan Balance: $125,000
  • Time to Fund: 10 to 30 days
  • Repayment options: Immediate repayment, forbearance
  • Fees: Late fee
  • Discounts: Autopay
  • Eligibility: Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from an eligible institution
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 12 months
  • Loan servicer: LendKey Technologies Inc.
  • Max. graduate Loan Balance: $175,000
  • Credible Review: LendKey Student Loans review
  • Offers Parent PLUS Refinancing: No


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
3.45%+ N/A7, 10, 15$10,000 up to the total amount of qualified education debt
  • Fixed APR: 3.45%+
  • Variable APR: N/A
  • Min. credit score: 670
  • Loan amount: $10,000 up to the total amount
  • Loan terms (years): 7, 10, 15
  • Repayment options: Military deferment, loans discharged upon death or disability
  • Fees: None
  • Discounts: None
  • Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: No
  • Loan servicer: AES
  • Max. Undergraduate Loan Balance: No maximum
  • Max. Gradaute Loan Balance: No maximum
  • Offers Parent PLUS Refinancing: Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.49%+ N/A5, 8, 12, 15$7,500 to $300,000
  • Fixed APR: 4.49%+
  • Variable APR: N/A
  • Min. credit score: 670
  • Loan amount: $7,500 to $300,000
  • Loan terms (years): 5, 8, 12, 15
  • Repayment options: Does not disclose
  • Fees: None
  • Discounts: None
  • Eligibility: Must be a U.S. citizen and have and at least $7,500 in student loans
  • Customer service: Email, phone, chat
  • Soft credit check: Yes
  • Cosigner release: After 12 months
  • Loan servicer: PenFed
  • Max. Undergraduate Loan Balance: $300,000
  • Max. Graduate Loan Balance: $300,000
  • Offers Parent PLUS Refinancing: Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.29%+ N/A5, 10, 15$7,500 up to $250,000
(depending on highest degree earned)
  • Fixed APR: 4.29%+
  • Variable APR: N/A
  • Min. credit score: 680
  • Loan amount: $7,500 to $250,000
  • Loan terms (years): 5, 10, 15
  • Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all 50 states; must also have at least $7,500 in student loans and a minimum income of $40,000
  • Customer service: Email, phone
  • Soft credit check: Does not disclose
  • Cosigner release: No
  • Loan servicer: Rhode Island Student Loan Authority
  • Max. Undergraduate Loan Balance: $150,000 - $249,000
  • Max. Graduate Loan Balance: $200,000 - $249,000
  • Offers Parent PLUS Refinancing: Yes
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures

About the author
Evelyn Pimplaskar
Evelyn Pimplaskar

Evelyn Pimplaskar is Credible’s editor-in-chief. Her career has spanned nearly every form of writing and editing, from newspaper and magazine articles, to press releases, case studies and online content. She’s covered topics ranging from volatile local elections and tools to dissuade birds from roosting on commercial buildings, to income taxes, student loans, investing, borrowing and saving.

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