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What Is The Average Student Loan Interest Rate?


Interest rates on student loans range from 0% to approaching double digits. But what is the average student loan interest rate?

I was one of the lucky ones who was able to consolidate subsidized student loans in the early 2000s to an interest rate of 1.75% if memory serves me correct. A decade later, students were being charged 6.8%.

Meanwhile, the federal government has now instituted a payment pause with 0% interest, and private refinances are charging close to 0% themselves. You can see the latest offers for private refinancing including interest rate ranges and exclusive cash back bonuses here.

This syndicated post from Ashley Kilroy discussing how interest rates vary based on numerous factors was originally published on SoFi.




With college tuition on the rise, students may take out student loans as they pursue their education. Student loans come with interest and sometimes other loan fees. As you repay student loans, that interest can add up.

While there are options like scholarships, grants, and work-study, sometimes student loans can be necessary to help students fill the gaps as they finance their education. Before borrowing student loans, it’s important to understand how they work, what the average student loan interest rates are like, and how interest rates impact your loan.


What Is The Average Student Loan Interest Rate?


So, what is the average student loans interest rate?

The interest rate on a student loan varies based on the type of student loan. Federal student loans have a fixed interest rate, meaning it is set for the life of the loan. This interest rate is set annually by Congress. The current interest rates for federal student loans disbursed between July 1, 2021 and July 1, 2022 have been set at:

•  3.73% for Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduate students

•  5.28% for Unsubsidized Loans for graduate or professional students

•  6.28% Direct PLUS loans for parents, graduate or professional students


Private student loan interest rates vary by lender and each have their own criteria for which rates you qualify for. Private lenders also may offer different interest rates if you have a cosigner on your student loan. Private student loans also may offer variable interest rates, meaning they can start lower than a fixed interest rate but then go up over time, based on market changes.

The interest rates on private student loans can vary anywhere from 1% to 13%, depending on the lender, the type of loan, and on individual financial factors including the borrower’s credit history.

Related: Types of Federal Student Loans


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How Are Interest Rates Determined?

As mentioned previously, the interest rates on federal student loans are set annually by Congress. The rates are tied to the financial markets—Congress sets them based on the 10-year Treasury note. Since 2006, all federal student loans have fixed interest rates. Although federal student loans are serviced by private lenders selected by the federal government, the private lender has no say in the interest rate offered.

For private student loans, the lenders set their own rates, though they often take cues from federal rates. Each lender has their own algorithm and credit standards. The rates quoted for student loans vary based on each applicant’s individual situation—though generally the better a potential borrower’s financial history is, the better rate they may be able to qualify for. When considering a private student loan, shop around with a few different lenders to find the best rate and terms for your personal needs.

To learn more about private and federal student loans check out our student loan help center.


How Is Student Loan Interest Calculated?


The interest on federal student loans accrues daily. To calculate the interest as it accrue, the following formula can be used.

Interest amount = (outstanding principal student loan balance × interest rate factor) × days since last payment

In other words, you will multiply your outstanding loan balance by the interest rate factor. Then, multiply that result by the days since you last made a payment.

To calculate that interest rate factor you can divide the interest rate by the number of days of the year (365).
For example, let’s say you have an outstanding student loan balance of $10,000 and it’s been 30 days since your last payment. Here’s how to calculate your interest:

$10,000 x (3.73%/356)=1.02
1.02 x 30 days=$20.66

Interest amount $20.66

Many private student loans will also accrue interest on a daily basis, however, the terms will ultimately be determined by the lender. Review the lending agreement to confirm.


What to Look For In a Student Loan Interest Rate

When you take out a federal student loan, you’ll receive a fixed interest rate. This means that you’ll pay a set amount for the term of the student loan. In addition, all of the terms, conditions, and benefits are determined by the government. And, federal student loans provide some additional perks that you may not find with private lenders like income-driven repayment plans.

On the other hand, private loans tend to have higher interest rates since the lender sets them. Private lenders review your credit score, income, and other factors to determine the rate you receive. This way, they can ensure you’re financially stable and can repay your loan before loaning you the funds.

Because of the higher interest rates and potentially fewer perks, you should first take advantage of all federal student loans you qualify for before comparing private loan options.


Average Interest Rates for Student Loans FAQs


Here are some common questions about the average interest rates of student loans.


What Is a Good Fixed Interest Rate for Student Loans?

When it comes to cost, the lower the interest rate, the better. The lower the interest rate, the less a borrower will owe over the life of the loan, which could help individuals as they work on other financial goals. If you’re taking out federal loans, the student loan interest rate is set by federal law, so you don’t have a choice for what is and isn’t a reasonable interest rate.

When it comes to private student loans, it’s wise to shop around and compare your options to find the most suitable financing solution. Since every lender offers different terms, rates, and fees, getting quotes from multiple lenders may help you select the best option for your personal needs. But, keep in mind, private student loans do not have the same borrower protections as federal student loans, including income-driven repayment plans or deferment options, and should be considered only after all federal aid options have been exhausted.


Is 30k In Student Loans Bad?

If you owe $30,000 in student debt, you’re right in line with the outstanding balance of most borrowers. Roughly 42.9 million Americans have federal student loan debt, and each owes about $36,406.


Is a 4.75% Interest Rate Good?

With interest rates on private student loans ranging anywhere between 1% and 13%, a 4.75% interest rate is not too bad. But, when it comes to federal average student loan interest rates, you can expect to pay 3.73% for undergraduate direct subsidized loans and direct unsubsidized loans.


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How Can I Reduce the Interest Rates on my Student Loans?


The interest rate on federal student loans, while fixed annually for the life of the loan, does fluctuate over time. For example, for the 2021-2022 school year, Direct subsidized and unsubsidized loans for undergraduates increased to 3.73% from 2.75% for the 2020-2021 school year.

To adjust the rate on an existing student loan, borrowers generally have two options. They can refinance or consolidate the loans with hopes of qualifying a lower interest rate.

Refinancing a federal loan with a private lender eliminates them from federal borrower protections such as income-driven repayment plans or Public Service Loan Forgiveness. The federal government does offer a Direct Consolidation loan, that allows borrowers to consolidate their federal loans into a single loan. This will maintain the federal borrower protections but won’t necessarily lower the interest rate. When federal loans are consolidated into a Direct Consolidation Loan, the new interest rate is a weighted average of your original federal student loans’ rates.

Refinancing student loans with a private lender may allow qualifying borrowers to secure a lower interest rate or preferable loan terms. Note that extending the repayment term will generally result in an increased cost over the life of the loan.

To see how refinancing could work for your student loans, take a look at the student loan refinance calculator.


The Takeaway


The average student loan interest rate varies depending on the type of loan. The interest rate for federal Direct Unsubsidized and Subsidized loans for undergraduate borrowers during the 2021-2022 school year is 3.73%. The interest rate on private student loans is determined by a variety of factors including the borrower’s credit history and may range anywhere from 1% to up to 13%.

Refinancing with a private lender may allow borrowers to qualify for a lower interest rate, which could help them save money over the life of the loan. Remember that choosing to refinance with a private lender means the borrower will lose the protections of a federal loan (such as Income Based Repayment, Income Contingent Repayment, or PAYE), but if you don’t think you will use those programs, refinancing may be an option to consider.


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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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1 thought on “What Is The Average Student Loan Interest Rate?”

  1. Great column. I will pass along to our followers.
    Small typo: $10,000 x (3.73%/356)=1.02
    should be 365
    All the best,


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