What’s the Average Student Loan Interest Rate?

With college tuition on the rise, students may take out student loans as they pursue their education. Student loans come with interest and sometimes other loan fees. As you repay student loans, that interest can add up.

While there are options like scholarships, grants, and work-study, sometimes student loans can be necessary to help students fill the gaps as they finance their education. Before borrowing student loans, it’s important to understand how they work, what the average student loan interest rates are like, and how interest rates impact your loan.

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What Is The Average Student Loan Interest Rate?

So, what is the average student loans interest rate?

The interest rate on a student loan varies based on the type of student loan. Federal student loans have a fixed interest rate, meaning it is set for the life of the loan.

For the 2022-2023 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 4.99%, the rate on Direct Unsubsidized loans for graduate and professional students is 6.54%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 7.54%. The interest rates on federal student loans are fixed and are set annually by Congress.

Private student loan interest rates vary by lender and each has its own criteria for which rates you qualify for. Private lenders also may offer different interest rates if you have a cosigner on your student loan. Private student loans also may offer variable interest rates, meaning they can start lower than a fixed interest rate but then go up over time, based on market changes.

The interest rates on private student loans can vary anywhere from 1% to 13%, depending on the lender, the type of loan, and on individual financial factors including the borrower’s credit history.

Recommended: Types of Federal Student Loans

How Are Interest Rates Determined?

As mentioned previously, the interest rates on federal student loans are set annually by Congress. The rates are tied to the financial markets—Congress sets them based on the 10-year Treasury note. Since 2006, all federal student loans have fixed interest rates. Although federal student loans are serviced by private lenders selected by the federal government, the private lender has no say in the interest rate offered.

For private student loans, the lenders set their own rates, though they often take cues from federal rates. Each lender has their own algorithm and credit standards. The rates quoted for student loans vary based on each applicant’s individual situation—though generally the better a potential borrower’s financial history is, the better rate they may be able to qualify for. When considering a private student loan, shop around with a few different lenders to find the best rate and terms for your personal needs.

To learn more about private and federal student loans check out our student loan help center.

How Is Student Loan Interest Calculated?

The interest on federal student loans accrues daily. To calculate the interest as it accrue, the following formula can be used.

Interest amount = (outstanding principal student loan balance × interest rate factor) × days since last payment

In other words, you will multiply your outstanding loan balance by the interest rate factor. Then, multiply that result by the days since you last made a payment.

To calculate that interest rate factor you can divide the interest rate by the number of days of the year (365).
For example, let’s say you have an outstanding student loan balance of $10,000, an interest rate of 3.73%, and it’s been 30 days since your last payment. Here’s how to calculate your interest:

$10,000 x (3.73%/365)=1.02
1.02 x 30 days=$20.66

Interest amount $20.66

Many private student loans will also accrue interest on a daily basis, however, the terms will ultimately be determined by the lender. Review the lending agreement to confirm.

What to Look for in a Student Loan Interest Rate

When you take out a federal student loan, you’ll receive a fixed interest rate. This means that you’ll pay a set amount for the term of the student loan. In addition, all of the terms, conditions, and benefits are determined by the government. And, federal student loans provide some additional perks that you may not find with private lenders like income-driven repayment plans.

On the other hand, private loans tend to have higher interest rates since the lender sets them. Private lenders review your credit score, income, and other factors to determine the rate you receive. This way, they can ensure you’re financially stable and can repay your loan before loaning you the funds.

Because of the higher interest rates and potentially fewer perks, you should first take advantage of all federal student loans you qualify for before comparing private loan options.

Average Interest Rates for Student Loans FAQ

Here are some common questions about the average interest rates of student loans.

What Is a Good Fixed Interest Rate for Student Loans?

When it comes to cost, the lower the interest rate, the better. The lower the interest rate, the less a borrower will owe over the life of the loan, which could help individuals as they work on other financial goals. If you’re taking out federal loans, the student loan interest rate is set by federal law, so you don’t have a choice for what is and isn’t a reasonable interest rate.

When it comes to private student loans, it’s wise to shop around and compare your options to find the most suitable financing solution. Since every lender offers different terms, rates, and fees, getting quotes from multiple lenders may help you select the best option for your personal needs. But, keep in mind, private student loans do not have the same borrower protections as federal student loans, including income-driven repayment plans or deferment options, and should be considered only after all federal aid options have been exhausted.

Is 30k In Student Loans Bad?

If you owe $30,000 in student debt, you’re right in line with the outstanding balance of most borrowers. Roughly 42.9 million Americans have federal student loan debt, and each owes about $36,406.

Is a 4.75% Interest Rate Good?

With interest rates on private student loans ranging anywhere between 1% and 13%, a 4.75% interest rate is not too bad. But, when it comes to federal average student loan interest rates, you can expect to pay more than 4% for undergraduate direct subsidized loans and direct unsubsidized loans.

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How Can I Reduce the Interest Rates on my Student Loans?

The interest rate on federal student loans, while fixed annually for the life of the loan, does fluctuate over time. For example, for the 2021-2022 school year, Direct subsidized and unsubsidized loans for undergraduates increased to 3.73% from 2.75% for the 2020-2021 school year.

To adjust the rate on an existing student loan, borrowers generally have two options. They can refinance or consolidate the loans with hopes of qualifying a lower interest rate.

Refinancing a federal loan with a private lender eliminates them from federal borrower protections such as income-driven repayment plans or Public Service Loan Forgiveness. The federal government does offer a Direct Consolidation loan, that allows borrowers to consolidate their federal loans into a single loan. This will maintain the federal borrower protections but won’t necessarily lower the interest rate. When federal loans are consolidated into a Direct Consolidation Loan, the new interest rate is a weighted average of your original federal student loans’ rates.

Refinancing student loans with a private lender may allow qualifying borrowers to secure a lower interest rate or preferable loan terms. Note that extending the repayment term will generally result in an increased cost over the life of the loan.

To see how refinancing could work for your student loans, take a look at the student loan refinance calculator.

The Takeaway

The average student loan interest rate varies depending on the type of loan. The interest rate for federal Direct Unsubsidized and Subsidized loans is set annually by Congress and fixed for the life of the loan. The interest rate on private student loans is determined by a variety of factors including the borrower’s credit history and may range anywhere from 1% to up to 13%.

Refinancing with a private lender may allow borrowers to qualify for a lower interest rate, which could help them save money over the life of the loan. Remember that choosing to refinance with a private lender means the borrower will lose the protections of a federal loan (such as Income Based Repayment, Income Contingent Repayment, or PAYE), but if you don’t think you will use those programs, refinancing may be an option to consider.

There are absolutely no fees when refinancing with SoFi. See your interest rate in just a few minutes—with no pressure to sign up.


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SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL SEPTEMBER 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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What Is a Federal Perkins Loan?

Perkins Loans were designed for undergraduate and graduate students who demonstrated exceptional financial need. Although the program has ended, 1.6 million borrowers still owe $4.7 billion in Perkins Loans as of mid-2021.

The loans were meant to make going to school and repaying student loans easier for students whose financial situation may have prevented them from going to school at all.

The program expired on Sept. 30, 2017. If you were awarded a Perkins Loan before then, you still have to pay your loan back, in almost all cases.

Benefits of Federal Perkins Loans

Perkins Loans Are Subsidized Loans

With federal subsidized student loans like Perkins Loans, the government pays the interest on the loan while you’re in school, during your grace period, and if you need to defer your loan payments for an eligible reason.

That creates significant savings compared with federal unsubsidized student loans, when interest may continue to grow even if you are not currently required to make payments on the loan.

The benefit still exists for students who took out Perkins Loans.

Additionally, Federal Perkins Loans had no origination fee. In contrast, Direct Loans currently have an origination fee of 1.057%, and Direct PLUS Loans for parents and grad students have a fee of 4.228% until Oct. 1, 2021. (The percentages change on Oct. 1 every year.)

Perkins Loan Interest Rate

While other federal student loan rates are tied to the 10-year Treasury note, the Perkins Loan rate was fixed at 5%—which used to be lower than some other loan types.

For the 2022-2023 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 4.99%, the rate on Direct Unsubsidized loans for graduate and professional students is 6.54%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 7.54%. The interest rates on federal student loans are fixed and are set annually by Congress.

Extended Grace Period

Another benefit of Perkins student loans is their extended grace period.

Most federal student loans have a grace period of six months after graduation to begin payments. Perkins Loans give an extra three months, so borrowers don’t have to start repaying a Perkins Loan for nine months after they graduate, leave school, or drop below half-time enrollment.

That said, any borrower who is eager to start repaying student loans doesn’t have to wait until a grace period is over to begin.

Perkins Loan Forgiveness Programs

If you have Perkins Loans, you may also qualify for certain forgiveness programs, depending on your employment or volunteer status.

If you work as a Peace Corps volunteer, firefighter, law enforcement officer, nurse, librarian with a master’s degree at a Title I school, public defender, teacher who meets specific criteria, among several other jobs, you could be eligible to have all or part of your Perkins Loan forgiven.

How Much Could You Borrow?

If you were eligible for a Perkins Loan, you most likely were only able to take a portion of your federal loans out as Perkins Loans. The amount you were able to borrow in Perkins Loans was determined by your personal financial situation.

For dependent undergraduate students whose parents are eligible for Direct PLUS Loans, the aggregate federal student loan limit is $31,000, with no more than $23,000 of that for subsidized loans. Undergrads deemed independent can have an aggregate of $57,500 in federal student loans, with no more than $23,000 in subsidized loans.

The aggregate federal loan limit for graduate or professional students is $138,500, which includes federal loans received for undergraduate studies.

Refinancing Your Student Loans

You may now be seeking a lower interest rate for your outstanding student loan balance.

Since graduating from college and getting a job, you may be making significantly more money and have established good credit. If that’s the case, refinancing your federal and/or private loans may be a good choice.

Even though Perkins Loans have good repayment options and a steady, reasonably low-interest rate, not all student loans enjoy the same perks.

Before you refinance, which means paying off any or all current loans with a new, private loan, preferably with a lower interest rate, it is important to review the benefits of your current loans. Refinancing would eliminate federal benefits like deferment and income-driven repayment plans.

Depending on your credit history and earning potential, you may be able to qualify for lower monthly payments or a lower interest rate, which could potentially reduce the amount of money you pay in interest over the life of the loan.

The Takeaway

Federal Perkins Loans, for students of exceptional need, came with benefits and a fixed interest rate that was relatively low at the time. Billions are still owed on Perkins Loans, and a borrower may want to weigh the merits of seeking a lower rate.

SoFi is a leader in the student loan space, offering refinancing of both federal and private student loans with a fixed or variable rate and no application or origination fees.

See your student loan refinancing interest rate in just a few minutes. No strings attached.


SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL SEPTEMBER 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Source: sofi.com