Paying for college often means taking out student loans, but the interest rates you get can significantly impact how much you owe over time. Federal and private student loan rates change every year, making it important to stay updated on the latest numbers before borrowing.
This guide breaks down the current student loan interest rates, explains how they affect repayment, and offers insights into making informed decisions about borrowing for college.
Federal Student Loan Interest Rates for 2025
Federal student loan rates are set by Congress and change annually based on the 10-year Treasury note. Here are the latest rates for the 2025-2026 academic year:
- Undergraduate Federal Direct Stafford Loans: 5.85%
- Graduate Federal Direct Stafford Loans: 7.35%
- Federal Direct Grad PLUS Loans: 8.35%
- Federal Direct Parent PLUS Loans: 8.35%
These rates are fixed for the life of the loan, meaning your interest rate won’t change once you’ve borrowed. However, rates are trending upward, so future borrowers may face even higher rates.
Grace Periods and Repayment
Federal student loans generally come with a six-month grace period after you graduate, leave school, or drop below half-time enrollment. During this time, you’re not required to make payments, but interest may still accrue on unsubsidized loans.
Parent PLUS and Grad PLUS loans do not have a grace period, meaning repayment begins right after disbursement, unless you request deferment while enrolled.
Private Student Loan Interest Rates in 2025
Private student loan interest rates vary by lender and are based on factors like credit score, loan term, and whether you apply with a cosigner. Here’s what borrowers can expect for 2025:
- 5-year variable interest rate (no cosigner): 9.12%
- 5-year variable interest rate (with deferred payment): 9.85%
- 10-year fixed interest rate (no cosigner): 10.10%
- 10-year fixed interest rate (with deferred payment): 10.30%
Private loans often carry higher interest rates than federal loans, especially for borrowers with little or no credit history. However, applying with a creditworthy cosigner can significantly lower your interest rate.
Student Loan Interest Rate Comparison (2025)
Student loan interest rates vary depending on the type of loan you take out. Federal student loans generally offer lower, fixed rates, while private loans often have higher interest rates that depend on credit history and loan terms. Below is a comparison of the current rates for federal and private student loans in 2025.
| Loan Type | Interest Rate (%) |
|---|---|
| Undergraduate Federal Direct Stafford | 5.85% |
| Graduate Federal Direct Stafford | 7.35% |
| Federal Direct Grad PLUS | 8.35% |
| Federal Direct Parent PLUS | 8.35% |
| Private 5-year variable (no cosigner) | 9.12% |
| Private 5-year variable (deferred payment) | 9.85% |
| Private 10-year fixed (no cosigner) | 10.10% |
| Private 10-year fixed (deferred payment) | 10.30% |
This table highlights the differences between federal and private loans, helping you assess your options before borrowing. If you’re considering a private loan, shopping around and applying with a cosigner could help you secure a lower interest rate.
Check Out Our Top Picks for 2025:
Best Private Student Loans
How Student Loan Interest Rates Are Set
Federal and private student loan interest rates follow different rules.
- Federal loan rates are tied to the 10-year Treasury note and are adjusted each year based on market conditions. Congress sets these rates in May, and they remain fixed for loans issued between July 1 and June 30 of the following year.
- Private loan rates depend on individual financial factors like credit score, income, and debt-to-income ratio. Lenders also use financial benchmarks, such as the Secured Overnight Financing Rate (SOFR) or the prime rate, which fluctuate based on economic trends.
Unlike federal loans, private lenders offer both fixed and variable rates. Fixed rates stay the same throughout repayment, while variable rates can change over time, potentially increasing monthly payments.
Subsidized vs. Unsubsidized Loans
Federal student loans come in two main types: subsidized and unsubsidized. The key difference is who pays the interest while you’re in school.
Subsidized Loans
- Only available to undergraduate students with financial need.
- The government pays the interest while you’re enrolled at least half-time, during the six-month grace period after leaving school, and during deferment.
- Borrowing limits are lower compared to unsubsidized loans.
Unsubsidized Loans
- Available to undergraduate, graduate, and professional students, regardless of financial need.
- Interest accrues immediately, even while you’re in school. If unpaid, it capitalizes (is added to the loan balance), increasing the total amount owed.
- Higher borrowing limits compared to subsidized loans.
Which One Is Better?
Subsidized loans are the better option if you qualify, since they don’t accumulate interest while in school, reducing overall costs. However, if you don’t qualify, unsubsidized loans can still be a good option as they offer flexible repayment plans and lower rates than private loans.
Fixed vs. Variable Interest Rates
When borrowing a student loan, you’ll need to choose between a fixed or variable interest rate. Each option has advantages and drawbacks, depending on your financial situation and risk tolerance.
- Fixed interest rates stay the same for the life of the loan, providing predictable monthly payments. This stability makes it easier to budget for repayment, which is why most federal student loans only offer fixed rates.
- Variable interest rates can fluctuate based on market conditions, typically changing monthly, quarterly, or annually. While they often start lower than fixed rates, they carry the risk of increasing over time, which could make repayment more expensive.
Choosing the Right Option
- If you want predictable payments and long-term stability, a fixed-rate loan is the safer choice.
- If you’re comfortable with some uncertainty and expect to pay off your loan quickly, a variable-rate loan could save you money if interest rates remain low.
Federal student loans only come with fixed rates, while private student loan lenders offer both options. If considering a variable-rate loan, it’s important to understand how often the rate can change and whether you can afford a potential increase in payments.
How a Cosigner Can Impact Your Interest Rate
A cosigner with a strong credit history can help you secure better terms on a private student loan. If your credit score is low or nonexistent, adding a cosigner can significantly reduce your interest rate, potentially saving you thousands over the life of the loan.
For example:
- A borrower with a 610 credit score might get an interest rate of 12.0% without a cosigner, but 7.6% with one.
- A borrower with a 700 credit score might see their rate drop from 9.31% to 6.15% with a cosigner.
Having a cosigner can make a big difference, but it also means they are equally responsible for the loan. If you miss payments, their credit score will take a hit, too. Make sure both you and your cosigner understand the risks before moving forward.
See also: How to Get Student Loans Without a Cosigner
How are student loan interest rates trending?
Student loan interest rates have been rising in recent years due to inflation and changes in Treasury yields.
- In 2008, undergraduate loan rates were 6.0%, and PLUS loans had a 7.9% rate.
- By 2011, undergraduate loan rates hit a low of 3.4%, but they have steadily increased since then.
- As of 2025, undergraduate federal loan rates are approaching 6%, and PLUS loans are over 8%.
Private loan rates are also climbing, making it more expensive to borrow. If you’re planning to take out student loans, it’s worth shopping around for the best interest rates and exploring ways to reduce borrowing.
How to Calculate Student Loan Interest
Student loan interest adds to your total repayment amount, so knowing how it’s calculated can help you estimate costs and plan your payments.
Step-by-Step Interest Calculation
- Find the daily interest rate – Divide the annual interest rate by 365.
- Calculate the daily interest charge – Multiply the daily interest rate by the remaining loan balance.
- Determine the monthly interest cost – Multiply the daily interest charge by the number of days in the billing cycle.
Example:
If you have a $10,000 loan with an interest rate of 6.5%:
- Step 1: 6.5% ÷ 365 = 0.000178 (daily interest rate)
- Step 2: $10,000 × 0.000178 = $1.78 (daily interest charge)
- Step 3: $1.78 × 30 (days in a billing cycle) = $53.40 (monthly interest)
Each month, before reducing the loan balance, $53.40 goes toward interest. As payments lower the principal, the amount of interest paid each month decreases.
Smart Borrowing Strategies for Student Loans
Student loans can be a useful tool, but they come with long-term financial obligations. Before taking out loans, consider the following:
- Borrow only what you need – Just because you qualify for a loan doesn’t mean you should take the full amount.
- Pay interest while in school – This can reduce the overall cost of your loan.
- Explore grants and scholarships – Free money is always better than borrowing.
- Look into work-study programs – Earning income while in school can help reduce the need for loans.
Taking on student loans is a big financial decision. Make sure you understand the interest rates, repayment terms, and long-term costs before borrowing.
Final Thoughts
Student loans can open the door to higher education, but the interest rates you lock in will impact your financial future. Federal loans generally offer lower, fixed rates and better repayment options, while private loans can fill funding gaps but often come with higher costs.
If you need to borrow, compare your options carefully, borrow only what you need, and consider making payments while in school to reduce long-term costs. Scholarships, grants, and work-study programs can also help minimize debt.
Staying informed about student loan interest rates and repayment terms can help you make smarter financial choices—both now and after graduation.
