Your rate depends on the loan type, when you borrowed, and your credit history — not on how much you owe

Student loan interest rates are set by law for federal loans and by the lender for private loans. If your rate is higher than a friend's, the most common reason is that you have a different type of loan. A Direct Unsubsidized Loan issued in 2024 carries a different rate than one issued in 2022. Private loans vary by lender and by your credit score at the time you borrowed. The amount you borrowed does not change your rate — a $5,000 loan and a $50,000 loan from the same program in the same year have the same interest rate.

Federal loan rates are set by Congress and change each year based on the 10-year Treasury note. Private loan rates are set by each bank or lender and depend on your creditworthiness. If you borrowed from two different private lenders, or borrowed federal loans in different years, your rates will almost certainly differ.

Key Takeaways

  • Federal student loan rates are set by Congress and vary by loan type and the year you borrowed, not by how much money you took out.
  • Private student loan rates depend on your credit score and the lender's policies at the time you borrowed, so two people borrowing the same amount can have very different rates.
  • You can find your federal loan rate on your loan documents or in your Federal Student Aid account; private loan rates appear on your promissory note and billing statements.
  • Refinancing a federal loan into a private loan locks in a new rate based on your current credit score, which may be higher or lower than your original rate.

How federal loan rates are determined

The federal government sets a single interest rate for each type of federal loan each year. All Direct Subsidized Loans issued in the 2024–2025 school year have the same rate, regardless of who borrowed them or how much they borrowed. The rate for Direct Unsubsidized Loans is the same across all borrowers that year. PLUS loans (Parent PLUS and Grad PLUS) have their own separate rate, also uniform across all borrowers.

Congress sets these rates using a formula tied to the 10-year Treasury note, plus a fixed percentage. The rate changes every year on July 1. If you borrowed in 2020, your loans carry the 2020 rate. If you borrowed in 2024, they carry the 2024 rate. A loan you took out five years ago will have a lower or higher rate than a new loan, depending on whether Treasury rates have risen or fallen.

You can see the current federal loan rates and historical rates on the Federal Student Aid website. Your own loan documents and your account at studentaid.gov show the exact rate on each of your loans.

Why private loan rates differ from person to person

Private student loans are issued by banks, credit unions, and online lenders. Each lender sets its own rates based on risk. A borrower with a credit score of 750 will receive a lower rate than a borrower with a score of 650, even if they borrow from the same lender on the same day. Some lenders also offer rate discounts for automatic payment or for being a customer of their bank.

Your credit history at the time you borrowed is what matters. If you borrowed a private loan when your credit was poor, that rate is locked in for the life of the loan — it does not improve if your credit improves later. If someone else borrowed from the same lender a year later with better credit, they will have a lower rate on an otherwise identical loan.

Private lenders also compete differently. One bank might offer 6.5 percent to a borrower with a 700 credit score; another might offer 7.2 percent for the same borrower. Shopping around before you borrow matters, but once you sign, the rate is set.

The difference between subsidized and unsubsidized federal loans

Subsidized and Unsubsidized Direct Loans have different interest rates. In recent years, Unsubsidized loans have carried a slightly higher rate than Subsidized loans. Both rates are set by Congress and change annually, but they are not the same number. If you have both types of loans, you will see two different rates on your loan documents.

The rate difference is usually less than 0.5 percent, but it adds up over time. A $10,000 Subsidized loan at 5.5 percent and a $10,000 Unsubsidized loan at 6.0 percent will cost you different amounts in total interest by the time you finish repaying.

How to find your actual interest rate

Log into your account at studentaid.gov to see all your federal loans and their rates. Each loan is listed separately with its type, balance, and interest rate. If you have private loans, check your promissory note (the document you signed when you borrowed) or log into your lender's website. Your billing statement also shows your current rate.

Write down the rate for each loan. If you are comparing your rate to someone else's, make sure you are comparing the same loan type from the same year. A 2023 Unsubsidized loan and a 2024 Unsubsidized loan will have different rates because Congress changed the rate between those years.

What happens if you refinance a federal loan

Refinancing means taking out a new private loan to pay off your federal loan. Your new rate will be based on your current credit score and the lender's current rates, not on your original federal rate. If your credit has improved since you borrowed, you might get a lower rate. If credit conditions have changed or your score has dropped, you might get a higher rate.

Refinancing a federal loan into a private loan also means you lose federal protections: income-driven repayment plans, Public Service Loan Forgiveness, and the ability to pause payments during hardship. Most people should not refinance federal loans unless they have a stable income and do not need these protections.

Comparing your rate to someone else's

When you compare rates with someone else, ask them three questions: What type of loan is it (Subsidized, Unsubsidized, PLUS, or private)? What year did you borrow it? And if it is a private loan, what lender issued it?

If they borrowed a federal loan in a different year, their rate will differ from yours because Congress sets a new rate each July. If they borrowed a private loan from a different lender or with a different credit score, their rate will differ for that reason. If you borrowed the exact same type of federal loan in the exact same year, your rates should be identical. If they are not, one of you may have a loan type you are not aware of, or there may be an error in your account.

Frequently Asked Questions

Can I change my interest rate after I have borrowed?

No. Federal loan rates are fixed for the life of the loan. Private loan rates are also fixed unless your promissory note includes a variable-rate option, which is rare. The only way to change your rate is to refinance into a new loan with a new lender, which means you lose your original loan's terms and protections.

Why did my rate go up when I took out a second loan?

Congress changed the federal loan rate between the year you borrowed your first loan and the year you borrowed your second. Federal rates change every July 1. Your first loan keeps its original rate; your second loan has the new rate. Both rates are correct and permanent on their respective loans.

Is a higher interest rate ever a mistake?

For federal loans, no — the rate is set by law and applied to all borrowers of that loan type in that year. For private loans, it is possible a lender made an error, but it is rare. If you believe your private loan rate is wrong, contact your lender with your promissory note and ask them to review it.

Does paying more per month lower my interest rate?

No. Your interest rate is fixed and does not change based on how much you pay each month. Paying more does reduce the total interest you pay over the life of the loan because you owe less principal, but it does not change the rate itself.