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To gauge public awareness of how rising interest rates might affect the cost of borrowing for college, Credible recently surveyed 1,000 students and parents about their basic knowledge of the cost of financing a degree — including how interest rates on student loans are set, how often they’re adjusted, and whether they can change once taken out.

If you’d like to test your own knowledge, it might just put you on a path to making smarter decisions about borrowing for college.


Now that you’ve taken our survey, read our story about how others did on the same test, and explore our website for tips on minimizing the cost of taking out student loans.

Scroll down for answers, below …

Answers to student loan interest rate quiz

1. Who sets the interest rates on federal student loans?

E) Congress sets interest rates on federal student loans, and has mandated that rates for new borrowers be adjusted once a year based on yields of 10-year Treasury notes auctioned in May.

2. True or false: Once you take out your first federal student loan, you’re guaranteed to get the same rate each year you’re enrolled in college or graduate school.

False. A student who takes out federal student loans as a freshman can expect to pay different rates on loans they take out each academic year. Since rates for new borrowers are indexed to 10-year Treasurys, they can go up or down. Rates on federal student loans for students headed to school this fall are going up for the second year in a row on July 1, 2018, and will be 5.05% for undergraduates, 6.60% for graduate students, and 7.60% for parents and graduate students taking out PLUS loans.

3. The interest rates on federal student loans issued today are …

A) Once issued, interest rates on federal student loans are fixed for the life of the loan.

4. Which federal student loans carry the highest interest rates?

C) Federal PLUS loans for parents and grad students carry the highest interest rates of all federal student loans.

5. Variable-rate student loans are indexed to which of the following benchmarks?

C) Private lenders typically offer borrowers a choice of fixed- or variable-rate loans. Variable-rate private loans are indexed to the prime rate or the London Interbank Offered Rate (LIBOR).

6. True or false: Once you have student loans, you cannot refinance to get a better interest rate.

False. Qualifying borrowers can refinance private or federal student loans with private lenders, who offer a range of rates and repayment terms.

7. Who determines the interest rates on private student loans and private student loan refinancing?

A) Interest rates on private student loans and private student loan refinancing are determined by market forces.

How students and parents did

If you were surprised at how many questions stumped you, don’t feel bad.

Among the 1,000 students and parents who took our quiz via Pollfish:

  • More than 9 out of 10 taking the quiz flunked, scoring less than 50 percent
  • The majority of respondents (63 percent) could answer only one or two questions correctly
  • Only 4 percent of those polled (38 out of 1,000 people) scored better than 50 percent (answering four out of seven questions correctly)
  • Nobody answered all seven questions correctly. Two people answered six questions correctly, and four people had five correct answers
  • One in five respondents (201) couldn’t answer a single question correctly

About the author
Matt Carter
Matt Carter

Matt Carter is a Credible expert on student loans. Analysis pieces he’s contributed to have been featured by CNBC, CNN Money, USA Today, The New York Times, The Wall Street Journal and The Washington Post.

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