Since student loans accrue interest, you end up paying more money than the amount you initially borrowed. That’s why it’s crucial to shop around to find your best student loan interest rates before you borrow.
We’ll help you get started with some key information about how student loan interest works. We’ll also explain the federal and private student loan interest rates so you’ll you can take out a new loan with have a better idea of what you’ll pay when you borrow for school.
- Understanding federal student loan interest rates
- Understanding private student loan interest rates
- Your loan term affects the amount of student loan interest you pay
- How to reduce the student loan interest you pay
- Understanding how student loan interest works helps you make smart choices
Federal student loan interest rates are set by the government. The rates are standardized — meaning that everyone who is eligible pays the same interest rate — but they can change from year to year.
Rates have gone up and down on federal student loans, so it’s important to know the interest charge before borrowing. This table shows how student loan interest rates have fluctuated over the past five years for different types of federal student loans.
|Type of Loan||Direct Subsidized Loans||Direct Unsubsidized Loans for Undergrads||Direct Unsubsidized Loans for Grad Students||Direct PLUS Loans|
|Who’s the loan for?||Undergrads with demonstrated financial need||Undergrads regardless of need||Grad students regardless of need||Grad students or parents of dependent undergrads|
|Interest rates for 2014-15||4.66%||4.66%||6.21%||7.21%|
|Interest rates for 2015-16||4.29%||4.29%||5.84%||6.84%|
|Interest rates for 2016-17||3.76%||3.76%||5.31%||6.31%|
|Interest rates for 2017-18||4.45%||4.45%||6.00%||7.00%|
|Interest rates for 2018-19||5.05%||5.05%||6.60%||7.60%|
|Interest rates for 2019-20||5.05%||5.05%||6.60%||7.08%|
|Note: New rates take effect July 1 of each year.|
Those interest rates can cause your loans to balloon. For example, if you had the average student loan balance of $39,400 with a 5.05% interest rate and a $419 monthly payment, you’d pay over $10,800 in interest fees over 10 years. In total, you’d pay back more than $50,000.
But there are ways to save money on interest, including refinancing student loans to a lower rate or paying off your loans more quickly.
Once you fully understand how student loan interest rates work, you can create a plan that works for your finances and helps you pay less interest over time.
While federal student loan interest rates are standardized by the government, there is much more variation in private student loan rates since lenders can decide how much interest to charge borrowers.
It’s important to shop around among private student loan providers to compare interest charges and find your best student loan rates. A good start could involve a look through the list of our favorite lenders to get an idea of what deals are out there. That said, note that rates fluctuate, and your credit score and other factors affect the interest you’ll pay.
At first glance, these private student loans might seem tempting since they can start at lower interest rates than federal ones. But it’s harder to qualify for these low rates, and these loans might carry more risk than federal student loans.
That’s because federal student loans come with protections such as access to income-driven repayment (IDR) plans, forbearance and deferment and even student loan forgiveness options. With private loans, you don’t have access to perks such as IDR plans or forgiveness.
But private student loans can be a useful tool. If you exhaust all your federal student loan options and still need more money to complete your degree, private loans can help fill the gap so that you can attend and finish school.
Your interest rate is one of the major factors determining how much you pay back on your federal or private student loans. But the length of time you take to repay your loan also makes a big impact.
While repaying your loan over a longer time allows you to have lower monthly payments, this approach means you’ll pay much more in interest. You can use our student loan term comparison calculator to estimate how loan terms could affect the total amount you’d pay. We’ve done this for you below with a $28,000 loan at 5% interest to showcase how much repayment periods matter.
As you can see, the longer you hold the loan, the more it’ll cost. Although the five-year plan comes with much higher monthly payments, following the 25-year plan will cost you an extra $17,402 in the end.
Because student loan interest charges can add so much to your educational costs, it’s a good idea to explore options to reduce your expenses. Following these steps could help you save money.
One of the best things you can do is to apply for grants and scholarships. Unlike student loans, which you have to repay, scholarships and grants are money that you don’t have to pay back. Plus, you can apply for and receive multiple grants and scholarships, lowering how much you need to borrow in student loans.
Devote an hour or two every week to finding grants and scholarships and submitting applications. You can also meet with your college’s financial aid office to see if there are institutional aid programs for which you qualify.
Besides scholarships, launching a high-paying college side hustle can make a huge difference in reducing your reliance on student loans.
And if you’ve already graduated, you can also look into side-hustle opportunities that you can do while working full time. If you apply all the extra income straight to your loans, you can really get ahead on repayment. Our extra payment calculator shows how much of an impact these extra payments make.
Once you graduate, refinancing your student loans can be a great option for lowering your interest rates.
When you refinance your loans, you can take out a new loan with completely different repayment terms. You could qualify for a loan with a lower interest rate, different repayment period and even a lower monthly payment.
Refinancing does have some drawbacks to keep in mind. For example, if you refinance federal loans, you’ll lose out on access to IDR plans and loan forgiveness. You also won’t get borrower protections such as the ability to defer loan payments.
But if you’re focused on becoming debt-free as quickly as possible, refinancing with a lower-interest loan can help you pay off your loan ahead of schedule.
For new and current borrowers alike, student loan interest rates can be extremely frustrating. After all, it’s bad enough to enter adulthood with tens of thousands of dollars in debt, much less to have to pay interest on it.
But now that you know what factors determine the interest you pay, you can make smart choices for dealing with your debt. You can also use these strategies to lower your interest rate as much as possible.
Interested in refinancing student loans?Here are the top 9 lenders of 2022!
|Lender||Variable APR||Eligible Degrees|
|1.74% – 8.70%1||Undergrad & Graduate|
|1.74% – 7.99%2||Undergrad & Graduate|
|1.74% – 7.99%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|1.74% – 7.99%5||Undergrad & Graduate|
|2.05% – 5.25%6||Undergrad & Graduate|
|1.86% – 6.01%||Undergrad |
|N/A7||Undergrad & Graduate|
|1.99% – 8.38%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 4, 2022.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Student Loan Refinance Interest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Let us know if you have any questions and feel free to reach out directly to our team.
3 Important Disclosures for SoFi.
Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for Navient.
6 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 5/17/2022 student loan refinancing rates range from 2.05% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.93% Fixed APR with AutoPay.
7 Important Disclosures for PenFed.
Fixed Rate Loan Terms: 5 years/60 monthly payments, 8 years/96 monthly payments, 12 years/144 monthly payments or 15 years/180 monthly payments. Annual Percentage Rate is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed rates range from 3.29% to 5.43% APR. Rates are subject to change without notice. Fixed APR: Fixed rates will not change during the term. This rate is expressed as an APR. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
8 Important Disclosures for Citizens.
Education Refinance Loan Rate Disclosure: Variable interest rates range from 1.99%-8.38% (1.99%-8.38% APR). Fixed interest rates range from 2.99%-8.63% (2.99%-8.63% APR).
IS Variable Rate Disclosure: Variable Rates advertised are based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of December 1, 2021, the one-month LIBOR rate is 0.09%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. Your final variable rate may be based upon the 30-day average SOFR index, as published by the Federal Reserve Bank of New York. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.
ERL Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of May 1, 2022, the 30-day average SOFR index is 0.29%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%.
Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.
Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.