Current Student Loan Interest Rates and How They Work

The federal student loan interest rate for undergraduates is 6.53% for new loans taken out for the 2024-25 school year, effective from July 1, 2024, to June 30, 2025. Federal rates for graduate student loans and PLUS loans are higher — 8.08% and 9.08%, respectively. These rates are the highest they've been in at least 16 years.

Private student loan interest rates can sometimes be lower than federal rates, but approval for the lowest rates requires excellent credit (scores above 689). Private loans originate from banks, credit unions or schools instead of the federal government. Private loans are best used to fill funding gaps after maxing out federal loans.

» MORE: Federal vs. private student loans

Current student loan interest rates

How student loan interest rates work

Student loan interest rates work differently depending on whether the loan is federal or private. For federal loans, every borrower taking out the same type of federal loan in a given year has the same interest rate. For private loans, borrowers with higher credit scores generally qualify for lower rates, while borrowers with lower credit scores get higher rates.

Federal student loans:

• Congress sets interest rates yearly based on the 10-year Treasury note.

• Most have fees charged as a percentage of the total loan amount.

• Rates are fixed for the life of the loan.

Private student loans:

• Interest rates are typically credit-based.

• Most private lenders don't charge origination fees.

• Borrowers can choose either a fixed or variable interest rate.

• Variable rates are subject to change monthly, quarterly or annually.

» MORE: How interest rate changes affect your student loans

Average student loan interest rate

The average student loan interest rate is 6.87% among all households with student debt, according to the Education Data Initiative, an organization that collects statistics on the U.S. education system. That includes both federal and private student loans — 94.81% of all student debt is federal.

With a 6.87% interest rate on $30,000 of student loans, a borrower would pay about $11,500 in interest over 10 years.

If you have multiple student loans with different rates, the weighted average interest rate is the rate you'll have if you consolidate the loans through the federal government. Federal consolidation won't lower your average interest rate, but refinancing with a private lender could.

Student loan interest rate calculator

» MORE: How to calculate student loan interest

How to lower my interest rate on student loans

Lowering your student loan interest rate can help decrease the total amount you pay over the life of a loan. Two options for lowering your interest rate are refinancing and automating payments.

If you have good credit, you may be able to refinance existing student loans to get a lower rate. Keep in mind that you'll lose access to borrower protections like income-driven repayment plans and loan forgiveness programs if you refinance your federal loans with a private lender.

Switching to autopay for federal student loans will save 0.25% on your interest rate. Many private lenders also offer a 0.25% discount for automating payment.

» MORE: 7 ways to get the lowest student loan interest rate

How to apply for a student loan

To apply for student loans, start with federal aid options first.

1. Complete the FAFSA. To apply for federal student loans, as well as grants and work-study, fill out the Free Application for Federal Student Aid — this FAFSA guide can help. 

2. Determine how much to borrow. While you may be able to take out multiple federal loans, there are maximum limits based on loan types and the total amount you can borrow throughout your education. 

3. Supplement with private. After exhausting federal student loan options, consider private lenders to fill in any funding gaps.

How to pay interest on student loans

Student loan interest accrues while you’re in school — unless you have subsidized federal loans — so you’ll owe more than you initially borrowed when you enter repayment. You can save on interest by:

• Pay off interest before your grace period ends. When your student loans enter repayment, the unpaid interest may be capitalized, or added to your principal balance. Avoid costly interest capitalization by making monthly interest-only payments or paying a fixed amount — say, $25 — while you’re in school. Alternatively, pay off the interest during your grace period using graduation money or income from your first post-college job.

• Avoid income-driven repayment, if possible. Federal income-driven repayment plans can keep cash-strapped borrowers out of default, but they also cost borrowers more interest in the long run. If you can afford to make federal loan payments on the standard, 10-year repayment plan, do it.

• Watch your overall financial health. Although you’ll save the most in student loan interest by paying off the loan as soon as possible, other financial goals are higher priority. Before paying extra on student debt, build an emergency fund, contribute to a 401(k) or IRA, and pay off high-interest debt such as credit cards.