If you are wondering what is the average interest rate on student loans, the short answer is that it depends on the type of loan you get. For federal student loans disbursed between July 1, 2025, and June 30, 2026, the average fixed rate is about 6.5% for undergraduate loans and about 7.5% for graduate loans. Private student loan rates can range from about 4% to 15% or more, depending on your credit score and other factors.
Understanding these rates matters because even a small difference in interest can add thousands of dollars to your total repayment. This article breaks down current averages, how rates are set, and what you can do to secure a lower rate.
Federal Student Loan Interest Rates for 2025-2026
Federal student loans have fixed interest rates, meaning the rate stays the same for the life of the loan. The U.S. Department of Education sets these rates each year based on the 10-year Treasury note auction in May. For the 2025-2026 academic year, the rates are as follows:
| Loan Type | Fixed Interest Rate | Borrower Type |
|---|---|---|
| Direct Subsidized and Unsubsidized Loans | 6.53% | Undergraduate students |
| Direct Unsubsidized Loans | 8.08% | Graduate or professional students |
| Direct PLUS Loans (for parents or graduate students) | 9.08% | Parents or graduate/professional students |
These rates are for loans first disbursed on or after July 1, 2025, and before July 1, 2026. If you borrowed before that date, your rate may be different.
Private Student Loan Interest Rates
Private student loans are offered by banks, credit unions, and online lenders. Unlike federal loans, private loans can have fixed or variable interest rates. The average rate for a private student loan in 2026 depends heavily on your creditworthiness.
- Borrowers with excellent credit (720 or higher) may qualify for rates as low as 4% to 6%.
- Borrowers with good credit (660-719) might see rates between 6% and 9%.
- Borrowers with fair or limited credit (below 660) could face rates from 10% to 15% or higher.
- Variable rates often start lower but can increase over time, making them riskier.
Many private lenders also require a co-signer if you have no credit history. A co-signer with strong credit can help you get a lower rate.
How Interest Accrues and Capitalizes
Interest on student loans is calculated as a percentage of your principal balance. For federal unsubsidized loans and all private loans, interest starts accruing as soon as the loan is disbursed. If you do not make payments while in school, that interest is added to your principal balance when your grace period ends. This is called capitalization, and it increases the total amount you owe.
For subsidized federal loans, the government pays the interest while you are in school at least half-time, during your grace period, and during deferment. This can save you a significant amount of money over the life of the loan.
Factors That Affect Your Interest Rate
Several factors determine the interest rate you receive on a private student loan. Understanding these can help you plan your borrowing strategy.
Credit Score and History
Lenders use your credit score to assess risk. A higher score generally means a lower rate. If you are a student with no credit history, adding a co-signer with good credit can improve your chances of a lower rate.
Loan Term Length
Shorter repayment terms often come with lower interest rates but higher monthly payments. Longer terms have higher rates but lower monthly payments. Choose a term that fits your budget without stretching too far into the future.
Fixed vs. Variable Rates
Fixed rates stay the same for the entire loan term, giving you predictable payments. Variable rates can change based on market conditions, starting lower but potentially rising. If you prefer stability, a fixed rate is usually safer.
School and Program
Some lenders offer lower rates for students in certain majors or at specific schools. Always compare offers from multiple lenders to find the best deal.
How to Get the Best Interest Rate
Even if you are not sure what is the average interest rate on student loans, you can take steps to secure a rate that works for you.
- Max out federal loans first because they have fixed rates and flexible repayment options.
- Improve your credit score before applying for private loans.
- Add a creditworthy co-signer if needed.
- Compare rates from at least three different private lenders.
- Consider a variable rate only if you plan to repay quickly and can handle rate changes.
Remember that you do not have to accept the first offer you receive. Shopping around can save you thousands over the life of the loan.
Comparing Federal vs. Private Loan Rates
Here is a quick comparison to help you decide which type of loan is right for you.
| Feature | Federal Loans | Private Loans |
|---|---|---|
| Interest Rate Type | Fixed | Fixed or variable |
| Average Rate (2025-2026) | 6.53% (undergrad) | 4% to 15% |
| Credit Check Required | No (except PLUS) | Yes |
| Repayment Flexibility | Income-driven plans, deferment, forbearance | Limited |
| Loan Forgiveness Options | Yes (Public Service Loan Forgiveness) | Rarely |
Federal loans generally offer more protections, so they are a good first choice. Private loans can fill gaps but often come with fewer benefits.
Current Trends and Predictions for 2026-2027
As of August 2026, the Federal Reserve has held interest rates steady after several increases. This has kept federal student loan rates relatively high compared to a few years ago. For the upcoming 2026-2027 academic year, rates are expected to remain similar, but they could change based on the May 2026 Treasury auction. If you are planning to borrow in the fall, it is wise to check the official rates as soon as they are announced.
Private loan rates may also stay elevated, but lenders often offer promotional discounts for autopay or loyalty. Always read the fine print to understand how discounts are applied.
Final Summary
Knowing what is the average interest rate on student loans helps you make informed borrowing decisions. For federal loans in the 2025-2026 year, undergraduate rates average around 6.5%, graduate rates around 8%, and PLUS loans around 9%. Private loan rates vary widely, from 4% to 15% or more, based on your credit. To get the best rate, start with federal loans, compare private offers, and consider a co-signer if needed. Always read the terms carefully and plan for repayment before you borrow.
Frequently Asked Questions
What is the average interest rate on federal student loans?
For the 2025-2026 academic year, the average fixed rate is 6.53% for undergraduate loans, 8.08% for graduate loans, and 9.08% for PLUS loans.
What is the average interest rate on private student loans?
Private student loan rates vary by credit score and lender, with averages ranging from about 4% to 15% for the 2025-2026 period.
How often do student loan interest rates change?
Federal student loan rates change every year on July 1, based on the 10-year Treasury note auction in May. Private loan rates can change at any time, especially for variable-rate loans.
Can I get a lower interest rate on my student loans?
Yes, you can lower your rate by improving your credit score, adding a co-signer with good credit, comparing multiple lenders, or refinancing your loans after graduation.
Do student loan interest rates differ for undergraduate and graduate students?
Yes, graduate students typically have higher interest rates on federal loans, with 8.08% for Direct Unsubsidized Loans compared to 6.53% for undergraduate loans.
