If you’re asking “what’s the interest rate on a student loan?” the short answer is: it depends on the loan type. Federal student loans have fixed rates set by Congress, while private loans have rates that vary by lender and your credit. As of the 2025-2026 school year, federal undergraduate loans carry an interest rate of 6.53%, and graduate loans are 8.08%. Parent PLUS loans are at 9.08%. These rates are fixed for the life of the loan.
Federal student loan interest rates
Federal loans are the most common choice for students. The U.S. Department of Education sets these rates each year for new loans. The rates are fixed, meaning they don’t change over time.
Here are the rates for loans disbursed between July 1, 2025, and June 30, 2026:
| Loan Type | Interest Rate | Borrower Type |
|---|---|---|
| Direct Subsidized & Unsubsidized | 6.53% | Undergraduate students |
| Direct Unsubsidized | 8.08% | Graduate or professional students |
| Direct PLUS (Parent or Grad) | 9.08% | Parents or graduate students |
These rates apply to new loans taken out for the current academic year. If you already have federal loans from earlier years, your rate may be different. Each year’s loans have their own fixed rate.
How federal loan interest accrues
Interest on federal student loans accrues daily based on your principal balance. For subsidized loans, the government pays the interest while you’re in school at least half-time. For unsubsidized loans, interest starts accruing from the first disbursement.
If you don’t pay the interest while in school, it may be capitalized. Capitalization means the unpaid interest gets added to your principal, increasing your balance. This can make your loan grow faster than you expect.
Private student loan interest rates
Private loans come from banks, credit unions, or 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 loan rates typically range from about 4% to 15% for fixed-rate loans. Variable rates can start lower but may increase over time. Private loans also may have fees, and they lack federal protections like income-driven repayment.
Because rates vary widely, it’s essential to compare offers from multiple lenders. Always check the Annual Percentage Rate (APR), which includes fees and interest.
Fixed vs. variable interest rates
Federal loans always have fixed rates. Private loans can be fixed or variable. A fixed rate stays the same for the entire loan term. A variable rate can change periodically, often based on a benchmark like the Secured Overnight Financing Rate (SOFR).
Variable rates may start lower, but they carry risk. If market rates rise, your monthly payment could increase. Fixed rates provide predictability. For most students, a fixed rate is safer.
Which is better for you?
Choose a fixed rate if you want stable payments. Choose a variable rate only if you can handle potential increases. Consider your budget and future income.
Factors that affect your student loan interest rate
Several factors influence what rate you’ll get, especially for private loans:
- Credit score – Higher scores usually mean lower rates.
- Income – Lenders prefer borrowers with steady income.
- Co-signer – Having a creditworthy co-signer can lower your rate.
- Loan term – Shorter terms often have lower rates.
- Market conditions – Rates move with the economy.
Federal loan rates are the same for all borrowers, regardless of credit. That’s why many students start with federal loans.
How to get the lowest possible rate
If you need private loans, improve your chances of a low rate. First, check your credit report for errors. Second, pay down existing debt to improve your debt-to-income ratio. Third, consider a co-signer with strong credit.
Also, compare rates from at least three lenders. Many allow you to prequalify with a soft credit check, which won’t hurt your score. Look at the total cost, not just the rate.
Strategies to reduce interest costs
Even with a set rate, you can lower how much interest you pay overall. Make payments while in school if possible. Even small amounts can reduce principal. If you have private loans, consider refinancing later when your credit improves.
For federal loans, you can consolidate, but that doesn’t change your rate. Income-driven repayment plans may lower monthly payments but can extend the term, increasing total interest.
Summary
Knowing what’s the interest rate on a student loan is the first step to smart borrowing. Federal rates for 2025-2026 are 6.53% for undergraduates, 8.08% for graduate students, and 9.08% for PLUS loans. Private rates vary widely. Always compare options and understand how interest accrues. Borrow only what you need, and pay down interest early to save money.
Frequently Asked Questions
What is the current interest rate on federal student loans?
As of the 2025-2026 school year, federal undergraduate loans have a fixed rate of 6.53%, graduate loans are 8.08%, and PLUS loans are 9.08%.
Do student loan interest rates change every year?
Yes, federal rates are set each year for new loans, but once you take a loan, its rate is fixed for the life of that loan.
Are private student loan rates higher than federal rates?
Private rates can be lower or higher than federal rates, depending on your credit score and the lender. They can range from about 4% to 15%.
Can I get a lower interest rate on my student loans?
You can lower your rate by improving your credit, getting a co-signer, or refinancing private loans later. Federal loans have fixed rates that cannot be negotiated.
What is the difference between fixed and variable interest rates?
A fixed rate stays the same for the entire loan term, while a variable rate can change over time, which may increase your monthly payment.
