For the 2024–2025 academic year, the interest rate on federal undergraduate student loans is set at 6.53%. If you’re considering taking out a private student loan, it’s important to know that interest rates vary based on the lender, loan type, and whether the rate is fixed or variable. For instance, if you choose a fixed-interest loan from the lending marketplace Credible, your interest rate could range between 3.39% and 17.99%.
Key Points to Note
- Federal student loan interest rates: Undergraduate loans have a 6.53% interest rate, graduate loans are set at 8.08%, while parent PLUS loans have an interest rate of 9.08%.
- Private student loan rates: As of March 2025, fixed interest rates through Credible start at 3.39%, while variable interest rates start at 4.13%.
- Outstanding student debt: As of the fourth quarter of 2024, total federal student loan debt in the U.S. has surpassed $1.6 trillion.
Understanding Private Student Loan Interest Rates
Unlike federal loans, private lenders determine their interest rates based on a borrower’s credit history and financial profile. The interest rate you qualify for depends on your credit score, income, and whether you have a co-signer.
Below is a breakdown of private student loan interest rates from Credible, as of March 2025:
| Loan Type | Fixed APR | Variable APR |
|---|---|---|
| Undergraduate & Graduate | 3.39% – 17.99% | 4.13% – 17.99% |
| Refinance | 3.85% – 11.69% | 4.35% – 12.68% |
Since federal student loans don’t require a credit check, they are often the best first option for students. However, private loans are based on creditworthiness, meaning many students will need a co-signer to qualify. In fact, over 90% of private undergraduate student loans in the 2022–2023 academic year were issued with a co-signer.
If you don’t have a good credit score or a co-signer, some lenders specialize in offering student loans for borrowers with bad credit or no co-signer.
💡 Tip: Try not to borrow more in student loans than you expect to earn in your first year after graduation.
Federal Student Loan Interest Rates
For the academic year from July 1, 2024, to June 30, 2025, federal student loan interest rates are as follows:
- Undergraduate loans – 6.53%
- Graduate loans – 8.08%
- Parent PLUS loans – 9.08%
In addition to the interest rates, federal student loans also come with origination fees:
- 1.057% for direct subsidized and unsubsidized loans
- 4.228% for parent PLUS loans
This origination fee is deducted from your loan amount before disbursement, meaning you will receive slightly less than you borrow.
Trends in College Enrollment
When the COVID-19 pandemic hit, many colleges and universities moved classes online. While some expected community colleges to see a surge in enrollment, the opposite happened—many community colleges experienced enrollment declines of up to 30%.
By spring 2022, the trend worsened, with total post-secondary enrollment dropping to 16.2 million students—a 4.1% decline from the previous year. This was mainly due to a 4.7% drop in undergraduate enrollment, which had already fallen 9.4% since before the pandemic.
However, by fall 2022, enrollment began to stabilize, and by spring 2024, it had increased by 2.5%, marking the second consecutive semester of growth.
Student Loan Debt Continues to Grow
Since the 2007–2008 financial crisis, government funding for higher education has declined by 25%, forcing students to cover more of their tuition costs. This has led to a steady rise in student debt, which has now exceeded $1.6 trillion as of late 2024.
There are, however, programs that offer student loan forgiveness for eligible borrowers.
Loan Forgiveness Options
- Public Service Loan Forgiveness (PSLF): Borrowers working in qualifying public service jobs can have their remaining balance forgiven after 120 qualifying payments.
- Income-Driven Repayment (IDR) Plans: Under the Saving on a Valuable Education (SAVE) plan, borrowers pay 5% of their discretionary income toward their student loans, and unpaid interest does not accrue. Those with a loan balance under $12,000 could be eligible for loan forgiveness after 10 years of payments.
However, on July 18, 2024, a federal appeals court temporarily blocked the SAVE plan, pending the outcome of two court cases. In response, the Department of Education placed borrowers in an interest-free forbearance while legal proceedings continue.
Borrowers nearing forgiveness through PSLF can choose to:
- “Buy back” months of PSLF credit if they reach 120 payments during forbearance.
- Switch to a different IDR plan to continue making progress toward forgiveness.
How Is Student Loan Interest Calculated?
Student loan interest is typically calculated using simple interest, meaning it only applies to the principal loan amount and does not compound daily like some other types of debt. The formula used is:
📌 Interest Amount = (Outstanding Principal × Interest Rate Factor) × Number of Days Since Last Payment
The interest rate factor is calculated by dividing the loan’s annual interest rate by the number of days in a year (365).
How Are Student Loan Interest Rates Determined?
Federal student loan interest rates are based on the 10-year Treasury note auction, which occurs every May, plus a fixed percentage increase. There are caps on how high rates can go:
- Undergraduate loans: Treasury rate + 2.05% (capped at 8.25%)
- Graduate loans: Treasury rate + 3.60% (capped at 9.50%)
- Parent PLUS loans: Treasury rate + 4.60% (capped at 10.50%)
In contrast, private student loan rates are set by individual lenders based on market trends and a borrower’s creditworthiness. Most private lenders offer both fixed and variable rates, with variable rates fluctuating based on financial benchmarks like the Secured Overnight Financing Rate (SOFR).
What Are the Current Student Loan Interest Rates?
For the 2024–2025 academic year, federal student loan rates are:
- Undergraduate subsidized & unsubsidized loans: 6.53%
- Graduate or professional unsubsidized loans: 8.08%
- Parent PLUS loans: 9.08%
Final Thoughts
Federal student loans generally offer lower interest rates and better repayment protections than private loans. Before borrowing, explore all federal options by submitting a Free Application for Federal Student Aid (FAFSA).
If federal loans aren’t enough, carefully compare private lenders to find the best rates. Be cautious when refinancing federal loans, as doing so may result in the loss of borrower protections.
For those struggling with repayment, loan forgiveness programs or income-driven repayment plans may offer relief. Always borrow only what you need and can afford to repay to avoid excessive debt burdens after graduation.
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