Federal and private student loan rates vary by loan type and when you borrowed
Student loan interest rates are not one number. Federal loans have rates set by Congress that change each year, while private loans are set by individual lenders and depend on your credit score. For the 2024–2025 school year, federal undergraduate loans carry a 6.53% interest rate, federal graduate loans 8.05%, and federal PLUS loans 9.05%. These rates apply to new loans only and stay fixed for the life of the loan. Private loan rates range from around 3% to 14% depending on the lender, your credit history, and whether you choose a fixed or variable rate.
The rate you actually pay depends on when you took out the loan. A student loan from 2015 has a different rate than one from 2024. Federal rates are recalculated each May based on the 10-year Treasury note, so older loans locked in whatever rate was current when they were disbursed. Private rates change whenever lenders adjust their pricing, which can happen monthly or more often.
Key Takeaways
- Federal student loan rates for 2024–2025 are 6.53% for undergraduate loans, 8.05% for graduate loans, and 9.05% for PLUS loans, and these rates are fixed for the life of each loan.
- Private loan rates vary by lender and your credit score, typically ranging from 3% to 14%, and may be fixed or variable.
- The rate on your existing loan does not change unless you refinance, but new loans taken out in different years will have different rates.
- Federal rates are set by Congress and recalculated each May; private rates are set by individual lenders and can shift frequently.
How federal loan rates are set and why they change each year
Congress sets the formula for federal student loan interest rates rather than letting the Department of Education choose them. Each May, the government calculates a new rate based on the 10-year Treasury note yield plus a fixed percentage added by law. For undergraduate loans, that fixed add-on is 2.05%; for graduate loans, 3.60%; and for PLUS loans, 4.60%. The Treasury yield changes constantly, so the total rate moves up or down depending on broader economic conditions.
This means federal rates are predictable but not stable. When the Treasury yield rises, federal loan rates rise. When it falls, federal rates fall. A student who borrowed in 2021 when rates were 3.73% has a lower rate than one who borrowed in 2024 at 6.53%, and both rates are locked in permanently. The rate you see published each May applies only to loans disbursed after that date.
Private loan rates and how your credit score affects them
Private lenders set their own rates based on the cost of borrowing money, their profit margin, and the risk they assess for each borrower. Someone with a credit score above 750 might receive a 4% rate, while someone with a score below 650 might be offered 12%. Private rates can be fixed (staying the same for the entire loan) or variable (changing periodically based on a market index). Variable rates often start lower but can increase significantly over time.
Private lenders also consider your income, employment history, and whether you have a cosigner. A cosigner with strong credit can lower your rate substantially. Unlike federal loans, private rates are not transparent across all lenders — you have to contact each one or use their online rate calculator to see what they would offer you. Rates also change frequently as lenders respond to market conditions and their own funding costs.
Why federal rates are usually lower than private rates
Federal loans are backed by the government, which means lenders have less risk of losing money. The government guarantees repayment even if you default, so federal loans do not need to charge high rates to protect themselves. Private lenders have no such may provide and must charge higher rates to cover the risk that borrowers will not repay.
Federal loans also come with built-in protections — income-driven repayment plans, deferment, forbearance, and loan forgiveness programs — that private lenders do not offer. These protections cost money to administer, yet federal rates remain lower because the government absorbs that cost. Private lenders pass their costs directly to borrowers through higher rates and fewer safety options.
How interest rates affect your total loan cost
A higher interest rate means you pay more money over the life of the loan. On a $30,000 federal undergraduate loan, a 3% rate costs roughly $4,700 in interest over 10 years, while a 6.53% rate costs roughly $10,400. The difference compounds over time, especially if you make only minimum payments or use an extended repayment plan.
Interest also accrues differently depending on your loan type and repayment plan. Unsubsidized federal loans accrue interest while you are in school; subsidized loans do not. If you defer or forbear a loan, unsubsidized interest keeps accruing and gets added to your balance. Private loans often accrue interest immediately, even before you graduate. Understanding how interest accrues on your specific loans helps you decide whether to pay interest while in school or let it capitalize (get added to the principal).
Refinancing and how it changes your interest rate
Refinancing means taking out a new loan to pay off an old one, usually with a different lender or loan type. If you have a federal loan at 6.53% and refinance into a private loan at 5%, your new rate is 5% — but you lose all federal protections like income-driven repayment and forgiveness. Refinancing makes sense only if the new rate is significantly lower and you do not need federal safety nets.
You cannot refinance a federal loan into another federal loan; refinancing always means switching to a private lender. Private loans can sometimes be refinanced into other private loans if your credit has improved or rates have dropped. Refinancing involves a new credit check and application, and the new lender pays off the old loan, so there is a brief period where you owe two lenders. Refinancing also resets the clock on your repayment timeline — a loan with 5 years left can become a 10-year loan again if you refinance.
Where to find the current federal loan rate for next year
The Department of Education publishes the new federal loan rates each May on studentaid.gov. The rates take effect for loans disbursed on or after June 1. You can also find rates on your loan servicer's website or by logging into your account on the Federal Student Aid portal. If you are a current student, your school's financial aid office will have the rates for loans you are about to take out.
Private loan rates are not published in one place. Each lender posts their rates on their own website, and most offer an online rate calculator that shows you an estimate without a hard credit pull. To compare private rates, you will need to check multiple lenders — common ones include Sallie Mae, Earnest, SoFi, and Discover, though many regional banks and credit unions also offer student loans. Rates can differ by hundreds of dollars over the life of the loan, so comparing is worth the time.
Frequently Asked Questions
Can I change my interest rate after I take out a loan?
No, federal loan rates are fixed and cannot change. Private loan rates are also fixed unless you chose a variable rate when you borrowed. The only way to change your rate is to refinance into a new loan with a different lender, which means applying, getting a new credit check, and signing a new promissory note.
Why did my federal loan rate go up from last year?
Your existing loan's rate did not go up — federal rates are fixed for life. If you took out a new loan this year, it has a different rate because Congress recalculates federal rates each May based on the Treasury yield. The Treasury yield was higher in 2024 than in previous years, so new loans in 2024 carry higher rates than loans from 2023.
Is a variable rate private loan ever a good idea?
Variable rates start lower than fixed rates, which can save money in the short term. However, they can increase over time, sometimes significantly. Variable rates make sense only if you plan to pay off the loan quickly or if you are confident rates will stay low. For most borrowers, a fixed rate is safer because you know exactly what you will pay each month.
Do I pay interest on federal loans while I am in school?
It depends on the loan type. Subsidized federal loans do not accrue interest while you are in school. Unsubsidized federal loans accrue interest immediately, though you do not have to pay it until after graduation — it gets added to your balance if you do not pay it during school. Private loans almost always accrue interest from the moment they are disbursed.