Student loan interest rates depend on the loan type and when you borrowed
Federal student loans and private student loans charge different 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 history. The rate you pay also depends on whether you took out the loan before or after certain policy changes — a loan from 2012 carries a different rate than one from 2024.
Interest starts accruing (building up) immediately on most federal loans, though some types don't charge interest while you're still in school. Private loans almost always charge interest from the moment the money is disbursed. The difference between these two systems means your total cost can vary significantly depending on which type of loan you have.
Key Takeaways
- Federal undergraduate loans disbursed in the 2024–2025 school year carry a 6.53% interest rate; federal graduate loans carry 8.23%; federal PLUS loans carry 9.23%.
- Federal loan rates are set by Congress and change each year based on the 10-year Treasury note, but your rate is locked in for the life of that loan.
- Private student loan rates range widely — typically 4% to 14% depending on the lender, your credit score, and whether you choose a fixed or variable rate.
- Interest on unsubsidized federal loans accrues while you are in school; interest on subsidized loans does not accrue until after you graduate.
- Your total repayment cost depends on the interest rate, the loan amount, and how long you take to repay — a higher rate or longer repayment period means you pay significantly more.
Federal student loan rates for the current school year
The U.S. Department of Education sets federal loan rates each year. For loans disbursed between July 1, 2024, and June 30, 2025, the rates are:
- Undergraduate Direct Loans (Stafford loans): 6.53%
- Graduate Direct Loans (Stafford loans): 8.23%
- Direct PLUS Loans (for parents or graduate students): 9.23%
These rates apply to all borrowers taking out these loan types in this period. Once you receive a loan at a particular rate, that rate stays with you for the entire life of the loan — even if federal rates change in future years. This is called a fixed rate.
Older federal loans may have different rates. Loans taken out before July 2006 used variable rates that changed each year. Loans from 2006 onward have been fixed. If you have multiple federal loans from different years, each one carries the rate that was in effect when you borrowed.
How federal rates are calculated each year
Congress sets the formula for federal loan rates. The current formula ties the rate to the 10-year Treasury note (a government bond). Each May, the Department of Education looks at the Treasury rate from the previous month, adds a fixed percentage on top, and that becomes the rate for loans disbursed the following July through June.
For undergraduate loans, the formula adds 2.05 percentage points to the Treasury rate. For graduate loans, it adds 3.60 points. For PLUS loans, it adds 4.60 points. The Treasury rate fluctuates based on economic conditions, so federal loan rates rise and fall year to year, but your individual loan's rate never changes once you borrow.
Congress can also change the formula itself. In 2013, Congress moved federal loans from variable rates to fixed rates. In 2023, Congress capped undergraduate loan rates at 8.25%, though current rates are below that cap.
Private student loan interest rates and how they vary
Private lenders — banks, credit unions, and online lenders — set their own rates. These rates typically range from around 4% to 14%, though some lenders offer rates outside this range. Your rate depends on several factors: the lender's pricing, your credit score, your income, whether you have a cosigner, and the type of rate you choose.
Most private lenders offer both fixed-rate and variable-rate options. A fixed rate stays the same for the life of the loan. A variable rate starts lower but can increase over time, usually tied to a market index like the prime rate. Variable rates often have a cap — a maximum rate you'll never exceed — but the cap is usually high enough that it could still rise significantly.
Credit score matters more with private loans than federal loans. A borrower with excellent credit (750+) might receive a rate around 5–7%, while a borrower with fair credit (650–700) might see 10–12%. Some lenders allow you to check your rate without a hard credit pull, so you can compare offers from multiple lenders before formally applying.
The difference between subsidized and unsubsidized federal loans
Federal loans come in two types: subsidized and unsubsidized. Both carry the same interest rate, but the timing of when interest accrues differs.
On a subsidized loan, the federal government pays the interest while you are in school at least half-time, during your grace period (usually six months after graduation), and during deferment (a period when you pause payments). You only start paying interest after those periods end. This means your loan balance doesn't grow while you're studying.
On an unsubsidized loan, interest accrues from the moment the loan is disbursed. If you don't pay the interest while in school, it gets added to your principal (the amount you borrowed), and you then pay interest on that interest — a process called capitalization. This can significantly increase what you owe by the time you graduate.
Undergraduate students can borrow subsidized loans up to a certain limit per year. Graduate students and parents can only borrow unsubsidized loans or PLUS loans. The amount of subsidized lending available depends on financial need as determined by the Free Application for Federal Student Aid (FAFSA).
How interest affects your total repayment cost
The interest rate, loan amount, and repayment timeline together determine how much you pay in total. A small difference in rate can add thousands to your repayment cost over time.
For example, a $30,000 unsubsidized federal undergraduate loan at 6.53% repaid over 10 years costs roughly $9,700 in interest. The same loan at 8% costs roughly $12,000 in interest — a difference of $2,300. If you extend repayment to 20 years, the interest cost rises to roughly $18,000 at 6.53% and $22,000 at 8%.
Private loans with variable rates can be harder to predict. If you borrow at 5% but the rate rises to 10% partway through repayment, your monthly payment may increase significantly. Some borrowers choose fixed rates specifically to avoid this uncertainty, even if the fixed rate starts slightly higher.
Income-driven repayment plans for federal loans can lower your monthly payment but extend your repayment period, which means you pay more interest overall. Paying more than the minimum each month reduces interest and shortens the loan life.
Where to find your current loan's interest rate
For federal loans, log into studentaid.gov and access your Federal Student Aid account. You'll see each loan listed with its interest rate, balance, and disbursement date. You can also call the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243).
For private loans, check your loan documents or log into your lender's website. Your monthly statement also shows the current rate and how much of each payment goes toward interest versus principal.
If you have older federal loans and aren't sure what rate you're paying, studentaid.gov will show you. Loans taken out before 2006 may have variable rates that changed annually, so your current rate may differ from what you originally borrowed at.
Frequently Asked Questions
Can I change my interest rate after I've taken out a loan?
No. Federal loan rates are fixed for the life of the loan and cannot be changed. Private loan rates are also locked in once you sign the promissory note. However, you can refinance a private loan with a different lender to potentially get a lower rate, though this is only an option if your credit has improved or market rates have dropped.
Do I pay interest on federal loans while I'm still in school?
It depends on the loan type. Subsidized loans do not accrue interest while you're enrolled at least half-time. Unsubsidized loans accrue interest immediately, though you don't have to pay it until after graduation. If you don't pay the accrued interest, it capitalizes and gets added to your principal.
Why are private loan rates higher than federal rates?
Private lenders take on more risk because they don't have government backing. Federal loans are may provide by the government, so lenders accept lower rates. Private lenders also price based on individual credit risk, so rates vary by borrower. Federal rates are the same for everyone in a given year.
What happens to my interest rate if I go back to school?
Your existing loans keep their original rate. If you take out new federal loans, they'll carry the rate in effect for the year you borrow. For subsidized loans, interest stops accruing again while you're enrolled at least half-time, but unsubsidized loans continue to accrue interest even if you return to school.
Is there a way to lower my interest rate on existing federal loans?
No direct way exists to lower the rate on a federal loan you already have. However, you can reduce the total interest you pay by making extra payments toward principal, which shortens the loan life. Some income-driven repayment plans extend the timeline, which increases total interest but lowers monthly payments.