What Is the Average Student Loan Interest Rate?

Understand the costs before you borrow

a circle of college students studying outside on a grassy area

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If you have student debt or are planning to borrow money for college, pay special attention to your student loan interest rates. The higher the student loan rate, the more you’ll pay—while lower rates will mean repaying less.

So what is the average student loan interest rate? The average student loan rate is 5.8% across all student loans, according to a 2017 policy paper from think tank New America. That depends on the type of loan you take out, such as federal or private student loans.

Here’s an overview of the average student loan interest rates you can expect, along with an explanation of how these rates are set.

Federal Student Loan Interest Rates

Student Loan Type Borrower Type Average Student Loan Interest Rate (2006-2019) Current Student Loan Interest Rates (2018-2019)
Direct subsidized and unsubsidized loans Undergraduate students 4.81% 5.05%
Direct unsubsidized loans Graduate or professional students 6.38% 6.60%
Direct PLUS loans Parents of undergraduate students and graduate or professional students 7.44% 7.60%

During that period, federal student loan rates varied quite a bit. On Direct Subsidized and Unsubsidized Loans for undergraduates, for example, the lowest rate of 3.4% is half the highest rate on these loans of 6.8%.

What Affects Federal Student Loan Rates?

Here are some factors that decide your interest rate:

What type of student loans you’re getting. Direct subsidized and unsubsidized loans carry the lowest federal student loan rates, while PLUS loans cost more.

What type of borrower you are. On direct unsubsidized loans, for instance, undergraduate students pay rates that are 1.55 percentage points lower.

When you take out a loan. Federal student loan interest rates are decided annually in the spring and take effect from July 1 to June 30 of the following year. So a loan will be assigned the federal student loan rate by the date of the first disbursement.

Recent 10-year U.S. Treasury yields. The formula for federal student loan rates is based on the 10-year treasury yield, plus a fixed add-on amount. When U.S. Treasury yields rise or fall, student loan rates track along with them.

There’s little you can do to control the rates on your federal student loans—you and everyone else taking out the same types of loans in the same period will pay the same interest.

Fortunately, federal student loan rates tend to beat what you’d pay on private student loans or other forms of debt, making them a fairly affordable way to finance a college degree.

Private Student Loan Interest Rates

While federal student loan rates are standardized to all borrowers on a specific type of loan, the range of private student loan rates is much wider.

Here’s a look some statistics on average private student loan interest rates:

  • 6.17% average starting rate for 5-year, private student loans with variable rates, per Credible borrower analysis
  • 7.64% average fixed rate for 10-year private student loan
  • Private student loan rates can be lower; variable rates start at 3.95% to 4.25% APR, while fixed rates start around 5.21% to 5.49% APR
  • On the higher end, private student loan rates can range up to 14.05% to 14.28% APR

Private student loan rates vary so much because they’re tied to several factors that can change from lender to lender, loan to loan, and borrower to borrower.

What Affects Private Student Loan Rates?

So with private student loan interest rates ranging from 3.95% up to 14.28%, it can be tricky to know what you can expect to pay. The following factors can impact private student loan rates:

Which lender you choose. While many lenders offer comparable and competitive rates, some can provide a better deal than others. Collecting rate quotes can help you find the lender offering the best deal for you.

How creditworthy you (and your co-signer) are. You’ll typically need a good credit score (mid-600s or higher) to qualify for a private student loan. Lenders also tie student loan rate offers to your credit score, so better credit will net you lower rates. If your credit score doesn’t meet this standard, you can add a co-signer to your application.

The private student loan terms you choose. The options you select for your loan will impact the interest you pay. Variable-rate student loans tend to have lower rates initially, for example, but can rise or fall in repayment. Fixed rates, on the other hand, can be higher at first but are locked in through repayment and won’t change. Many lenders also offer lower rates on shorter student loan terms.

The general rates environment when you originate a loan. Similar to how federal student loan rates are tied to U.S. Treasury yields, private student loan rates are also affected by what’s happening in the larger markets and economy. As overall rates rise or fall, you can expect private student loans to reflect those trends.

How to Fight High Student Loan Rates

Once you’ve already taken out a loan, your options for lowering student loan rates are limited—but not gone.

Many lenders offer a small rate discount, typically 0.25 percentage points, for setting up automatic payments.

Student loan refinancing can be an option to replace high-interest student loans with a newer loan at a lower rate. Making extra payments on your student loan can lower the balance and the interest you pay with it.

The best way to limit student loan interest rates is to borrow wisely in the first place. Students and their parents can compare federal and private student loan rates and take advantage of low-rate options first.