Everything You Need to Know About Student Loan Interest Rates

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution.

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When you borrow for school, you end up paying back more money than the actual amount initially borrowed. Why? Because lenders charge interest when you borrow money. The higher the interest rate, the more you’ll have to pay — and the more difficult student loan repayment becomes.

Comparison shopping to find loans offering the best student loan interest rates is important. We’ll help you get started with some key information about how student loan interest works.

We’ll also help you figure out the federal student loan interest rate and private student loan rates so that you’ll have a better idea of what you may need to pay when you borrow for school.

Understanding the federal student loan interest rate

The federal student loan interest rate is 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. In fact, rates went up in 2018, so students borrowing for the 2018-19 academic year will pay more than those who borrowed last 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 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%
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 $10,000 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.

Understanding private student loan rates

While federal student loan 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 the best student loan rates. As of Sept. 19, 2018, rates from top lenders vary between 3.69% and 12.99%, but 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 finish school.

Your loan term affects the amount of student loan interest you pay

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 see how loan terms 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 $17,402 extra in the end.

How to reduce the student loan interest you pay

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 can help you save money.

1. Before you borrow: Apply for scholarships and grants

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 free 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 applying. You can also meet with your college’s financial aid office to see if there are institutional aid programs for which you qualify.

2. Once you borrow: Try to boost your income to pay your loans down faster

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.

3. Once you’re stable: Refinance your student loans

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 become debt-free as quickly as possible, refinancing with a lower-interest loan can help you pay off your loan ahead of schedule.

Understanding how student loan interest works helps you make smart choices

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 what factors determine the interest you pay, you can make smart choices for dealing with your debt.

 Shannon Insler contributed to this post.

Interested in refinancing student loans?

Here are the top 7 lenders of 2019!
LenderVariable APREligible Degrees 
Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.45% APR (with Auto Pay) to 7.49% APR (with Auto Pay). Variable rate loan rates range from 2.14% APR (with Auto Pay) to 6.79% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 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% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of September 6, 2019, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 09/06/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.49% APR to 7.94% APR (with AutoPay). Variable rates from 2.14% APR to 7.84% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.14% APR assumes current 1 month LIBOR rate of 2.14% minus 0.15% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. 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. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.  
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for Laurel Road.

Laurel Road Disclosures

FIXED APR
Fixed rate options consist of a range from 3.50% per year to 5.55% per year for a 5-year term, 4.00% per year to 6.00% per year for a 7-year term, 4.30% per year to 6.40% per year for a 10-year term, 4.60% per year to 6.80% per year for a 15-year term, or 5.05% per year to 7.02% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan). The monthly payment for a sample $10,000 loan at a range of 3.50% per year to 5.55% per year for a 5-year term would be from $184.00 to $193.00. The monthly payment for a sample $10,000 loan at a range of 4.00% per year to 6.00% per year for a 7-year term would be from $138 to $148. The monthly payment for a sample $10,000 loan at a range of 4.30% per year to 6.40% per year for a 10-year term would be from $104 to $115. The monthly payment for a sample $10,000 loan at a range of 4.60% per year to 6.80% per year for a 15-year term would be from $79 to $91. The monthly payment for a sample $10,000 loan at a range of 5.05% per year to 7.02% per year for a 20-year term would be from $68 to $80.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.

VARIABLE APR
Variable rate options consist of a range from 2.43% per year to 6.05% per year for a 5-year term, 3.75% per year to 6.10% per year for a 7-year term, 4.00% per year to 6.15% per year for a 10-year term, 4.25% per year to 6.40% per year for a 15-year term, or 4.50% per year to 6.65% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.25% to 3.80% for the 5-year term loan, 1.50% to 3.85% for the 7-year term loan, 1.75% to 3.90% for the 10-year term loan, 2.00% to 4.15% for the 15-year term loan, and 2.25% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 2.43% per year to 6.05% per year for a 5-year term would be from $179 to $195. The monthly payment for a sample $10,000 loan at a range of 3.75% per year to 6.10% per year for a 7-year term would be from $137 to $148. The monthly payment for a sample $10,000 loan at a range of 4.00% per year to 6.15% per year for a 10-year term would be from $103 to $114. The monthly payment for a sample $10,000 loan at a range of 4.25% per year to 6.40% per year for a 15-year term would be from $77 to $88. The monthly payment for a sample $10,000 loan at a range of 4.50% per year to 6.65% per year for a 20-year term would be from $65 to $77.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.

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.


4 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.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.19% effective August 10, 2019.


6 Important Disclosures for LendKey.

LendKey Disclosures

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.


7 Important Disclosures for College Ave.

College Ave Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

1College Ave Refi Education loans are not currently available to residents of Maine.

2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.

4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 08/01/2019. Variable interest rates may increase after consummation.

2.14% – 6.79%1Undergrad
& Graduate

Visit Earnest

2.14% – 7.84%2Undergrad
& Graduate

Visit SoFi

2.43% – 6.65%3Undergrad
& Graduate

Visit Laurel Road

2.43% – 7.60%4Undergrad
& Graduate

Visit Splash

2.14% – 8.01%5Undergrad
& Graduate

Visit CommonBond

2.06% – 8.93%6Undergrad
& Graduate

Visit Lendkey

2.74% – 7.24%7Undergrad
& Graduate

Visit College Ave

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

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