Student loan interest rates are the portion of the student loan that is charged as interest to the borrower. A low interest rate means that you will be charged less money over the lifecycle of the student loan. This means that it is a very important datapoint to keep track of–over time a lower interest rate will save you a lot of money! 

Federal Student Loans

Federal interest rates vary from year to year as they are set by the United States Department of Education. The rates for student loan interest for the 2019-2020 academic year are:

Loan	Borrower Type	Interest Rate
Direct Subsidized Loans and Direct Unsubsidized Loans	Undergraduate Students	4.53%
Direct Unsubsidized Loans	Graduate or Professional Students	6.08%
Direct PLUS Loans	Parents and Graduate or Professional Students	7.08%

Note that loans that are subsidized are loans that you are not responsible for paying interest on while you are pursuing your degree. Loans that are unsubsidized will accrue interest during your time in school.

Private Student Loans

Private student loan interest rates vary from lender to lender. Our suggestion is to always shop around to see the best rates. We suggest using a private student loan marketplace to get a sense of the variety of interest rates available to you. 

Additionally, private student loan rates vary depending on whether your student loan is variable or fixed. Generally, variable interest rates can offer a lower student loan interest rate over the short term, but may fluctuate over the duration of the student loan. Fixed student loan rates are stable and thus much more predictable. 

Bottom Line

There is not an average student loan interest rate, so students and parents should research all of their options. We generally recommend that before considering other loans, you take advantage of all Direct loans available to you. These Federal Student Loans will have more favorable repayment terms and give you options including income-based repayment and potential loan forgiveness if you pursue particular careers. 

After you exhaust the Direct loans, you can consider private student loans. We always recommend that you shop around and compare various private student loan rates. Direct PLUS Loans should be taken out as a last resort as you pay for your higher education. 

Last updated 10/2019