What are the interest rates for student loans?

Student loan interest rates vary depending on the loan type and lender. For the 2025-2026 school year, federal undergraduate loans have a fixed rate of 6.53%, while graduate loans are 8.08% and PLUS loans are 9.08%. Private student loan rates typically range from about 4% to 15% depending on your credit score and repayment term.

Understanding how interest works is key to managing your debt. This article explains the current rates, how they are set, and what you can do to lower your costs.

Federal Student Loan Interest Rates for 2025-2026

Federal student loans have fixed interest rates set by Congress each year. These rates are determined by the 10-year Treasury note auction in May and apply to loans disbursed from July 1, 2025, through June 30, 2026.

Here are the current rates for federal loans:

Loan Type	Borrower Type	Fixed Interest Rate
Direct Subsidized and Unsubsidized	Undergraduate	6.53%
Direct Unsubsidized	Graduate or Professional	8.08%
Direct PLUS (Parent or Grad PLUS)	Parents or Graduate Students	9.08%

These rates are fixed for the life of the loan. That means your interest rate will not change even if market rates go up later.

How Federal Rates Are Set

Federal student loan rates are based on the high yield of the 10-year Treasury note at the final Treasury auction in May. For each loan type, a fixed margin is added:

• Undergraduate loans: 2.05% added to the Treasury yield
• Graduate loans: 3.60% added to the Treasury yield
• PLUS loans: 4.60% added to the Treasury yield

This formula means rates can change every year. For example, in 2020-2021, undergraduate rates were only 2.75% because Treasury yields were low. In 2023-2024, they rose to 5.50%.

Private Student Loan Interest Rates

Private student loans are offered by banks, credit unions, and online lenders. Their rates are not set by the government. Instead, they depend on your credit score, income, and whether you have a co-signer.

As of August 2026, private student loan rates generally range from:

• Fixed rates: 4.50% to 15.00%
• Variable rates: 4.00% to 14.00%

Variable rates can change monthly or quarterly, so they are riskier. Fixed rates stay the same for the entire repayment period.

Factors That Affect Your Private Rate

Lenders look at several things when deciding your rate:

• Credit score (higher scores get lower rates)
• Credit history (length and on-time payments)
• Income and debt-to-income ratio
• Whether you have a creditworthy co-signer

Students without a credit history often need a co-signer to qualify. Adding a co-signer with good credit can reduce your rate by several percentage points.

Comparing Federal vs. Private Loan Rates

Federal loans are usually cheaper for most students, but private loans can be competitive for those with excellent credit. Here is a quick comparison:

Feature	Federal Loans	Private Loans
Interest Rate Type	Fixed	Fixed or Variable
Current Rate Range	6.53% – 9.08%	4.50% – 15.00%
Credit Check Required	No (except PLUS)	Yes
Income-Driven Repayment	Yes	No
Loan Forgiveness Options	Yes	No

Federal loans offer more protections, like deferment and forbearance, which private loans may not provide. Always exhaust federal aid before considering private loans.

How Interest Accrues on Student Loans

Interest starts accruing as soon as your loan is disbursed, even while you are in school. For subsidized loans, the government pays the interest while you are enrolled at least half-time. For unsubsidized loans, you are responsible for all interest from the start.

If you do not pay the interest while in school, it is capitalized. That means the unpaid interest is added to your principal balance, and you will pay interest on that larger amount later.

Tips to Reduce Your Interest Costs

Here are some practical ways to lower the total interest you pay:

• Make interest payments while in school to avoid capitalization.
• Choose a shorter repayment term, like 10 years, instead of 20 or 25.
• Set up autopay to get a 0.25% discount with most federal loan servicers.
• Refinance private loans after graduation if your credit improves.

Even small extra payments can make a big difference over time. For example, paying $25 more each month can save you hundreds in interest.

Future Rate Trends and What to Expect

Interest rates for federal loans are tied to the economy. If the Federal Reserve raises its benchmark rate, Treasury yields often rise too, which pushes student loan rates higher. In 2025 and 2026, rates have been relatively high compared to the early 2020s.

For the 2026-2027 school year, rates will be set in May 2026. Based on current Treasury yields, experts expect similar or slightly lower rates, but nothing is guaranteed. Always check the official Federal Student Aid website for the most current numbers.

Summary

In short, federal student loan rates for 2025-2026 are 6.53% for undergraduates, 8.08% for graduate students, and 9.08% for PLUS loans. Private loan rates vary widely from 4% to 15% depending on your credit. Always borrow federal first, understand how interest accrues, and use strategies like autopay and extra payments to reduce your total cost.