What Is a High Interest Rate for Student Loans?

When you borrow money for college, your interest rate affects your monthly payments and total repayment costs. That's why it helps to get the most affordable loan possible — especially if you're borrowing a lot of money to fund your education.

You might be wondering, what is a high interest rate for student loans? In this guide, we’ll explore how interest rates work for private and federal loans, average rates for each, and what factors influence these rates. 

Average private student loan interest rates

Private student loan lenders set their own interest rates. There's not a lot of national data around how high or low interest rates are for private student loans, but here are the average rates offered to borrowers with credit scores of 720 or higher who used Credible to select a lender:

• 7.64% for a 10-year fixed-rate loan as of Jan. 22, 2024
• 10.31% for a 5-year variable-rate loan as of Jan. 22, 2024

These rates can fluctuate over time depending on market conditions. If your rate is above the current average as a new borrower, then you may be paying a high interest rate for student loans. 

There are many reasons why you could be paying a higher interest rate, including:

• Bad credit: Private lenders consider your credit score when deciding what rate to offer (or if you can borrow from them). Bad credit typically leads to higher interest rates.
• Limited income: Lenders want to see that you have enough earnings to repay your loans. A lower income could lead to higher interest rates or a loan denial.
• Other debt: Your debt-to-income ratio (your monthly debt payments divided by your gross monthly income) is a factor that private lenders look at. If you have a lot of debt in comparison to your income, you may present a greater risk to the lender and face higher rates.

Applying with a cosigner who has stronger credit than you can help you to get a lower rate or get approved when you might otherwise be denied. 

Federal student loan interest rates

Federal student loans have fixed interest rates, which means the interest rate stays the same over the life of the loan. They are set by Congress and may vary from year to year.

One of the benefits of federal loans is that every borrower taking out a loan during the same time frame is offered the same interest rate for that particular loan type. Your financial credentials and other personalized factors don't affect your rate. 

The table below shows the rates for different kinds of federal loans for the 2023-24 academic year:

Today's federal student loan interest rates are higher than they have been in recent years. The table below shows the 10-year average rate for the same loan types between 2013 and 2023:  

While federal interest rates are higher than average right now, it still makes sense for most students to exhaust federal student loans first due to the many benefits they provide, including income-driven repayment plans and loan forgiveness programs. 

What is a good student loan interest rate?

An ideal student loan interest rate is generally one that matches or is lower than the average rate other borrowers are able to obtain for the same type of loan. 

Regardless of where your rate falls relative to the average, you'll want to make sure that the payments on your loan are affordable for you. Even if you get offered a great rate, you still must be able to make your payments on time and be comfortable with the total borrowing costs you'll pay over time — or else you may want to reconsider borrowing.

Tips for lowering your interest rate

It's worth making the effort to reduce your borrowing costs — especially if you’re borrowing a lot of money for school that you'll be repaying over a long period. 

You may be able to reduce the rate you pay for private student loans with the following options:

• Apply with a cosigner: If you have a family member with solid financial credentials who is willing to cosign your loan, you may be offered a more affordable interest rate.
• Shop around: Rates vary by lender, so get several quotes to ensure you're paying the lowest price possible for your debt. 
• Choose a shorter payoff timeline: Loans with shorter repayment terms often come with lower rates than loans with longer timelines, since the lender is taking on less risk. You'll also save on overall interest — potentially thousands of dollars — by shortening your repayment period. Just be aware that your monthly payment will be higher since you’ll have less time to pay off your debt. 
• Refinance student loans: If you already have private student loans, you may be able to qualify for a refinance loan at a lower interest rate than your current debt if your financial situation has improved. Refinancing can be a great option, as you can potentially reduce your overall cost of borrowing. But keep in mind that refinancing federal student loans means you’ll lose access to perks like income-driven repayment plans, generous deferment and forbearance options, and loan forgiveness.

You can compare offers from the best student loan refinancing companies to see if you can save on your private loans. 

Student loan interest rate FAQ

How do student loan interest rates work? 

Federal student loan interest rates are tied to 10-year Treasury yields, plus an add-on percentage that varies by loan and borrower type. Every borrower taking out the same type of loan during the same time period will pay the same interest rate. 

Private student loan rates vary by lender and are based on your individual financial credentials, including your credit score and income. 

What’s the difference between fixed and variable rates?

Fixed-rate loans remain the same for the life of the loan. Your rate never changes and neither does your payment — or your total borrowing costs. 

Variable-rate loans are tied to a financial index, like the prime rate. Your rate can change over time, and it's possible that your payments and total borrowing costs could increase. Variable rates may start out lower than fixed rates, but you take on much more risk. 

Is 7% considered a high interest rate for student loans?

The average interest rate for a 10-year fixed-rate loan is 7.64% among borrowers with credit scores of 720 or higher who obtained a loan through Credible's marketplace as of Jan. 22, 2024. In this case, a rate of 7.00% could be considered a good rate if you’re taking out a private student loan. 

Keep in mind that whether a rate is competitive or not will also depend on factors like the type of loan you're taking out and its repayment terms.