Student loan interest rates depend on the loan type, when you borrowed, and whether the rate is fixed or variable
Federal student loans and private student loans charge different interest rates, and those rates change year to year. Federal loans have rates set by Congress and are the same for all borrowers in a given year. Private loans vary by lender and your credit score. Some rates stay the same for the life of the loan; others change annually based on a market index.
The interest rate you pay directly affects how much you owe over time. A 1% difference in rate can add thousands of dollars to what you repay, especially on larger balances or longer repayment terms. Understanding which type of loan you have and what rate applies to it is the first step to knowing what you'll actually pay back.
Key Takeaways
- Federal undergraduate loans have fixed rates set by Congress each year; rates for loans issued in 2024 differ from those issued in 2023.
- Federal graduate and Parent PLUS loans carry higher fixed rates than undergraduate loans, and rates vary by the year the loan was taken out.
- Private student loans often have variable rates that change annually, and your rate depends on your credit score and the lender's terms.
- Interest accrues (builds up) differently depending on the loan type: some accrue while you are in school, others do not start accruing until after graduation.
- You can find your exact rate by checking your loan documents, your loan servicer's website, or the Federal Student Aid website for federal loans.
Federal student loan rates are fixed and set by Congress each year
Federal loans issued in any given year have the same interest rate for all borrowers. Congress sets the rate, which is based on the 10-year Treasury note plus a fixed percentage. The rate applies to all loans of that type issued during that academic year, and it does not change after you receive the loan.
Rates differ by loan type. Subsidized Stafford loans (for undergraduates with financial need) have one rate. Unsubsidized Stafford loans (available to undergraduates and graduates regardless of need) have a different rate. Graduate PLUS loans and Parent PLUS loans carry higher rates than Stafford loans. Each type issued in the same year has its own fixed percentage.
Because Congress sets the rate, it can change from year to year. A loan you took out in 2022 may have a different rate than one you took out in 2024. If you have multiple federal loans, you may have multiple different rates. You can see the rates for loans issued in past years on the Federal Student Aid website under "Historical Interest Rates."
Private student loans often have variable rates tied to market conditions
Private lenders set their own rates based on your credit score, income, and the terms you choose. Many private loans have variable rates that change once a year, usually on an anniversary date. The rate is typically tied to a market index like the prime rate or SOFR (Secured Overnight Financing Rate), plus a margin the lender adds.
When the index goes up, your rate goes up. When it goes down, your rate goes down. Some private loans offer fixed-rate options, where the rate stays the same for the entire repayment period. Fixed rates are usually higher than the starting variable rate, but they protect you from future increases.
Your credit score at the time you apply has a major impact on the rate you receive. A higher credit score typically means a lower rate. Some lenders also offer rate reductions for setting up automatic payments or for maintaining good payment history, though these discounts are usually small (0.25% or less).
Interest accrues differently depending on when and how you borrowed
Accrual is when interest starts building up on your loan balance. With subsidized federal loans, the government pays the interest while you are in school at least half-time, during your grace period, and during deferment. You do not owe that accrued interest.
With unsubsidized federal loans and private loans, interest accrues from the moment the loan is disbursed, even while you are still in school. You are not required to pay it while in school, but if you do not pay it, the accrued interest is added to your principal balance when repayment begins. This process is called capitalization, and it means you end up paying interest on interest.
If you have unsubsidized loans and you are still in school, you can choose to pay the interest as it accrues to avoid capitalization. This reduces the total amount you owe after graduation. Some borrowers make small monthly payments during school for this reason.
How to find the interest rate on your specific loans
For federal loans, log into your account on StudentAid.gov. Under "Loan Summary," you will see each loan listed with its interest rate, disbursement date, and current balance. The rate shown is the rate that applies to that specific loan for its entire life.
If you have federal loans but have not yet created a StudentAid.gov account, you will need your Social Security number and a way to verify your identity. Once logged in, you can see all federal loans you have taken out, even if they are with different servicers.
For private loans, log into your lender's website or check your loan documents. Your promissory note (the contract you signed when you borrowed) lists the interest rate and whether it is fixed or variable. If you cannot find your documents, contact the lender directly by phone or through their website.
The difference between interest rate and APR
The interest rate is the percentage of your loan balance charged as interest each year. The APR (Annual Percentage Rate) includes the interest rate plus any fees the lender charges. For federal student loans, the interest rate and APR are usually the same because federal loans have no origination fees.
Private loans often have origination fees, which are deducted from the loan amount you receive. The APR reflects the true cost of borrowing by including these fees spread across the loan term. When comparing private loans, look at the APR rather than the interest rate alone, because it gives you a more complete picture of what you will pay.
How interest rate affects your total repayment amount
A higher interest rate means you pay more money over the life of the loan. On a $30,000 loan repaid over 10 years, the difference between a 4% rate and a 7% rate is roughly $9,000 in additional interest. The longer your repayment term, the more that interest rate difference matters.
If you have private loans with variable rates, your payment amount may change each year when the rate adjusts. Federal loans on standard 10-year repayment have fixed monthly payments because the rate does not change. If you are on an income-driven repayment plan, your payment is based on your income, not your loan balance, so a higher rate does not directly change your monthly payment—but it does mean more of each payment goes to interest rather than principal.
Frequently Asked Questions
Can I lower my student loan interest rate?
Federal loan rates are set by Congress and cannot be lowered. However, you may be able to refinance federal loans with a private lender to get a lower rate if your credit score has improved since you borrowed. Be aware that refinancing federal loans means losing federal protections like income-driven repayment and forgiveness programs. Private loan rates cannot be lowered by the lender, but some offer small discounts for automatic payments or loyalty.
What is the grace period and does interest accrue during it?
The grace period is typically six months after you graduate, leave school, or drop below half-time enrollment. During this time, you do not have to make payments on federal loans. Interest still accrues on unsubsidized loans and is capitalized when repayment begins. Interest does not accrue on subsidized loans during the grace period.
Why did my private loan interest rate go up?
If you have a variable-rate private loan, your rate increases when the market index it is tied to increases. This is automatic and happens once per year on your loan anniversary. If your rate went up outside of the annual adjustment period, contact your lender to ask why. Some lenders also raise rates if you miss payments.
Do I pay interest on interest with student loans?
Yes, if interest accrues on your loan and you do not pay it before repayment begins, it is added to your principal balance. You then pay interest on that larger amount. This is called capitalization. It happens automatically with unsubsidized federal loans and most private loans. You can avoid it by paying accrued interest while still in school.
How often does my federal loan interest rate change?
Federal loan interest rates do not change after the loan is issued. The rate you receive when you borrow stays the same for the entire life of that loan. However, new federal loans issued in future years may have different rates, because Congress sets a new rate each year.