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Cheapest loan rates
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Current Student Loan Interest Rates and How They Work
The federal student loan interest rate for undergraduates is 5.05% for the 2018-19 school year. Federal rates for unsubsidized graduate student loans and parent loans are higher — 6.60% and 7.60%, respectively. Private student loan interest rates can be lower than federal rates, but approval for the lowest rates requires excellent credit. If you have good credit, you may be able to refinance existing student loans to get a lower rate.
Current student loan interest rates
Federal student loan interest rates rose for the 2018-19 school year and apply to loans disbursed between July 1, 2018, and July 1, 2019. The interest rate for federal direct undergraduate student loans increased to 5.05%, up from 4.45% in 2017-18. Unsubsidized direct graduate student loan rates rose to 6.60%, up from 6.00%. Rates for PLUS loans, which are for graduate students and parents, rose to 7.60%, up from 7.00%.
Federal student loan fees are taken as a percentage of the total loan amount and deducted proportionally from each loan disbursement, meaning you’ll receive slightly less than the amount you borrow.
Current private student loan interest rates, updated monthly:
Fixed: 5.07% – 14.15% 6
Variable: 4.24% – 13.24% 6
Includes rates for Ascent’s Tuition and Independent loans.
Includes autopay discount of 0.25%.
Fixed: 5.25% – 12.19% 1
Variable: 4.47% – 12.44% 1
Fixed: 5.29% – 12.78% 2
Variable: 4.07% – 11.32% 2
Includes rates for undergraduate and graduate loans.
Includes autopay discount of 0.25%.
Fixed: 5.35% – 14.05% 3
Variable: 4.25% – 13.25% 3
Includes rates for undergraduate and graduate loans.
Fixed: 5.49% – 11.85% 4
Variable: 4.25% – 11.35% 4
Includes rates for undergraduate loans. Lowest rates shown include the auto debit discount.
Fixed: 5.99% – 13.99% 5
Variable: 4.24% – 13.24% 5
Includes rates for undergraduate and graduate loans.
Lowest rates shown include an interest-only repayment discount and a 0.25% interest rate reduction for Auto Debit Reward.
Current student loan refinancing rates, updated monthly:
Ready to compare all your student loan refinancing options?
Average student loan interest rate
The average student loan interest rate is 5.8% among all households with student debt, according to a 2017 report by New America, a nonprofit, nonpartisan think tank. That includes both federal and private student loans — about 90% of all student debt is federal.
With a 5.8% interest rate on $30,000 of student loans, a borrower would pay about $9,600 in interest throughout 10 years.
The average student loan interest rate is higher among some groups, according to the report. For instance, the average interest rate is 6.3% among households where the borrower didn’t complete a college degree, and 6.6% among households with incomes less than $24,000.
Student loan interest rate calculator
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 and 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 or quarterly
- Paying off interest before your grace period ends. When your student loans enter repayment, the unpaid interest will 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.
- Avoiding 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.
- Watching 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.
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SOURCE: http://www.nerdwallet.com/blog/loans/student-loans/student-loan-interest-rates/
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