Our goal here at Credible is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders, all opinions are our own.
Federal student loan interest rates depend on whether you’re a student or a parent and if you’re pursuing a bachelor’s degree or have moved on to grad school.
If you have good credit, you might qualify for a better rate on a private student loan than a federal loan. That’s particularly true if you have a cosigner. If you’ve already got federal loans, you can often qualify to refinance them at a lower interest rate with a private lender.
Here’s everything you should know about the current student loan interest rates.
In this post:
- Overall student loan interest rates
- Federal student loan interest rates
- Private student loan interest rates
- Student loan refinancing interest rates
- Average student loan interest rates
- How federal student loan interest rates are set
- How private student loan interest rates are set
- Student loan fees
Student loan interest rates
|Student loan refinancing||Fixed: 2.92%+ APR
Variable: 1.99%+ APR
|Private student loans||Fixed: 3.53%+ APR
Variable: 1.24%+ APR
|Federal student loans||Undergraduate: 2.75%
|Private student loan and refinancing annual percentage rates (APRs) are updated monthly. Federal student loan interest rates are accurate for the 2020-21 academic school year. The Department of Education does not calculate the impact of federal student loan fees on APR.|
Once you take out a federal student loan, the rate is fixed for life. But the rates offered to new borrowers are adjusted once a year to take into account the government’s borrowing costs.
Private student lenders also adjust the rates they offer when interest rates change because that affects how much it costs them to obtain the money that they lend. Private lenders tend to adjust rates more often than the federal government to stay current with market trends.
Federal student loan interest rates
Federal student loans are “one-size-fits-all” — your credit score doesn’t affect the interest rate. Everyone taking out the same type of loan during an academic year gets the same rate, which is fixed for the life of the loan. Federal loans should be the loans you pursue first since they are tied to certain benefits and typically have lower rates.
Students and parents taking out federal student loans during the 2020-21 academic year will pay the lowest interest rates in history. A rate decrease taking effect July 1, 2020, is the result of falling yields on U.S. Treasury notes, which fund government debt. Rates on federal student loans taken out by undergraduates, graduate students and parents during the 2020-21 academic year will be 1.79 percentage points lower than last year.
Private student loan interest rates
Rates on private student loans depend on your credit score and unique circumstances. Most private lenders offer you a choice of a fixed- or variable-rate loan, and it’s important to compare rates from several lenders so you can evaluate your options.
|Lender||Fixed Rates From (APR)||Variable Rates From (APR)|
|4.84% - 12.39%6||1.59% - 11.37%6|
|4.25% - 12.35%9||1.25% - 11.15%9|
your credit score. 100% free!
Lowest APRs reflect autopay, loyalty, and interest-only repayment discounts where available | 1Citizens Bank Disclosures | 2,3College Ave Disclosures | 6Discover Disclosures | 7EDvestinU Disclosures | 8INvestEd Disclosures | 9Sallie Mae Disclosures
Citizens Bank Student Loan Rate Disclosure Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2020, the one-month LIBOR rate is 0.17%. Variable interest rates range from 1.24%-11.39% (1.24%-11.00% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.25%-11.95% (4.25% - 11.53% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co- signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.
Student loan refinancing interest rates
A growing number of lenders also offer student loan refinancing of both private and federal student loans. Refinancing allows you to adjust your interest rate and repayment term. Depending on your strategy, you may be able to lower your monthly payment or save thousands in interest charges over the life of your loan.
|Lender||Variable rates from (APR)||Fixed rates from (APR)||Check rates from multiple lenders in 2 min|
Citizens Bank review
College Ave review
|Compare personalized rates from multiple lenders without affecting your credit score. 100% free!
Citizens Bank Education Refinance Loan Rate Disclosure: Citizens Bank Disclosures Citizens Bank Education Refinance Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2020, the one-month LIBOR rate is 0.17%. Variable interest rates range from 2.49%-8.38% (2.49%-8.38% APR) and will fluctuate over the term of the borrower's loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 3.20%-8.63% (3.20%-8.63% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
Check Out: The Best Student Loan Refinancing Companies
Average student loan interest rates
Because rates on federal student loans to new borrowers are recalibrated once a year, you’re likely to have different interest rates on the loans you take out each year you’re in college. When you’re taking out loans for grad school, or if you’re a parent, your rates will be higher.
Over the last 15 years, rates for federal student loans have averaged:
- 4.66% for undergraduates
- 6.22% for graduate students
- 7.27% for parents and graduate students taking out PLUS loans
According to a 2017 analysis by New America, the average interest rate across all student loans was 5.8%.
Learn More: What are Average Student Loan Interest Rates?
How federal student loan interest rates are set
Federal student loan rates are set by Congress. In theory, Congress can impose rates that are as high or low as lawmakers see fit.
To take politics out of the equation, in recent years Congress has tied rates on federal student loans to the government’s cost of borrowing. Under the system that’s been in place since 2013, rates on federal student loans for new borrowers are determined by an auction of 10-year Treasury notes that is held in May.
Here’s the formula the Department of Education uses to set rates for new borrowers each year:
- Loans to undergraduates: 10-year Treasury yield plus add-on of 2.05 percentage points
- Direct loans to graduate students:10-year Treasury yield plus 3.6 percentage points
- Parent and grad PLUS loans: 10-year Treasury yield plus 4.6 percentage points
Remember, once you take out a federal student loan, the rate is fixed for life — it won’t go up or down. The formula above is only used to set rates on loans taken out by new borrowers during a one-year window running from July 1 through June 30.
Congress has also set upper bounds for rates on new loans. Even if inflation soars, rates for new borrowers are capped at 8.25% for undergraduate loans, 9.5% for graduate loans, and 10.5% for PLUS loans.
How private student loan interest rates are set
Private lenders compete for business and may offer borrowers with excellent credit lower rates than the government. To make up for losses when borrowers fail to repay their loans, private lenders charge higher rates to borrowers who are assessed as risky. Your credit score, which is designed to predict the likelihood you will repay a loan, is the primary factor lenders consider when setting interest rates.
Because many students don’t have the credit history or earnings required to qualify on their own, most private student loans to undergraduates are cosigned. Even if you don’t need a cosigner to be approved, having one can help you secure a lower interest rate than you could get on your own.
Check Out: The Best Private Student Loan Lenders
Private and federal student loan fees
In addition to interest rates, it’s also important to factor in any fees that a lender charges. With private loans, any fees the lender charges must be factored into the APR.
The government charges upfront fees on all student loans, but does not provide an APR. PLUS loans carry an up-front fee that exceeds 4.2%, which is taken directly out of the loan proceeds.
If you begin repaying a PLUS loan immediately on the standard 10-year repayment plan, the up-front fee increases your APR by about a full percentage point.
But because the APR depends in part on how long you will take to repay a loan, the APR on federal student loans is not disclosed. Federal student loan borrowers may take anywhere from 10 to 30 years to repay their student loans.
Learn More: APR and Interest Rate: What’s the Difference?