Student Loan Interest Rates of 2020

As of

As of Monday, September 28, 2020

Student loans can be a useful way to fill financial gaps in paying for higher education expenses. However, borrowing money for school comes at a cost, particularly in the form of interest rates.

According to a January 2020 national survey by the Bipartisan Policy Center, 55 percent of respondents said that they didn’t know the interest rate on their student loan.

Student loan interest rates determine how much money you’ll ultimately owe, so it’s important to know what your interest rate is and how it affects your loans. Here’s an overview of historic and current student loan rates and what you need to know about how student loan interest works.

Summary: Bankrate’s student loan interest rate guide

Current student loan interest rates

Depending on the kind of student loan you have or are looking to get, interest rates vary.

Federal student loan interest rates

Loan type
Borrower
Fixed interest rate
Loan Fee
Direct Subsidized Loans and Direct Unsubsidized Loans
Undergraduate students
2.75%

1.059% for loans first disbursed on or after Oct. 1, 2019, and before Oct. 1, 2020

1.062% for loans first disbursed on or after Oct. 1, 2018, and before Oct. 1, 2019

Direct Unsubsidized Loans
Graduate or professional students
4.30%

1.059% for loans first disbursed on or after Oct. 1, 2019, and before Oct. 1, 2020

1.062% for loans first disbursed on or after Oct. 1, 2018, and before Oct. 1, 2019

Direct PLUS Loans
Parents and graduate or professional students
5.30%

4.236% for loans first disbursed on or after Oct. 1, 2019, and before Oct. 1, 2020

4.248% for loans first disbursed on or after Oct. 1, 2018, and before Oct. 1, 2019

Source: The U.S. Department of Education

Private student loan rates (graduate and undergraduate)

Lender
Fixed APR*
Variable APR
College Ave
3.99% to 12.99%
1.24% to 11.98%
CommonBond
5.56% to 10.74%
3.46% to 9.42%
Earnest
Starts at 3.95%
Starts at 1.24%
LendKey
Starts at 4.99%
Starts at 2.99%
SoFi
4.11% to 11.83%
1.78% to 11.73%

*Includes autopay discount

Refinance student loan interest rates

Lender
Fixed APR*
Variable APR
College Ave
3.74% to 8.99%
3.64% to 8.99%
CommonBond
2.99% to 5.99%
3.18% to 6.06%
Earnest
Starts at 2.98%
Starts at 1.99%
LendKey
Starts at 3.19%
Starts at 2.60%
SoFi
2.99% to 6.24%
1.99% to 6.24%

*Includes autopay discount

Average student loan rates

Since federal student loan rates change periodically, a historical overview of federal loan rates is helpful to gauge average student loan rates.

Loan first disbursed
Undergraduate Direct Subsidized Loans
Undergraduate Direct Unsubsidized Loans
Graduate or Professional Direct Unsubsidized Loans
Direct PLUS Loans
July 1, 2020 – June 30, 2021
2.75%
2.75%
4.30%
5.30%
July 1, 2019 – June 30, 2020
4.53%
4.53%
6.08%
7.08%
July 1, 2018 – June 30, 2019
5.05%
5.05%
6.60%
7.60%
July 1, 2017 – June 30, 2018
4.45%
4.45%
6.00%
7.00%
July 1, 2016 – June 30, 2017
3.76%
3.76%
5.31%
6.31%
July 1, 2015 – June 30, 2016
4.29%
4.29%
5.84%
6.84%
July 1, 2014 – June 30, 2015
4.66%
4.66%
6.21%
7.21%
July 1, 2013 – June 30, 2014
3.86%
3.86%
5.41%
6.41%
July 1, 2012 – June 30, 2013
3.40%
6.80%
6.80%
7.90%
July 1, 2011 – June 30, 2012
3.40%
6.80%
6.80%
7.90%
July 1, 2010 – June 30, 2011
4.50%
6.80%
6.80%
7.90%
July 1, 2009 – June 30, 2010
5.60%
6.80%
6.80%
7.90%
July 1, 2008 – June 30, 2009
6.00%
6.80%
6.80%
7.90%
July 1, 2007 – June 30, 2008
6.80%
6.80%
6.80%
7.90%
July 1, 2006 – June 30, 2007
6.80%
6.80%
6.80%
7.90%

Source: The Federal Register

How do student loan interest rates work?

Student loan interest is calculated using a simple daily interest formula. To calculate your interest, your lender multiplies your student loan rate by your remaining principal balance. Then this figure is multiplied by the number of days since you made your last loan payment. The final result is how much student loan interest you’ll be charged on top of your principal loan payment.

Typically, your monthly payments will cover any interest accrued. However, in some cases, such as deferment, unpaid student loan interest may be capitalized — meaning that the unpaid interest is added to your principal balance, causing you to pay interest on your interest.

How federal student loan interest rates work

Each spring, student loan interest rates are set by Congress based on the 10-year Treasury note yield. Federal loans tend to have lower interest rates than private loans and are fixed, meaning that the rate will not fluctuate for the life of the loan. The interest rate you receive on a federal student loan is not determined by your credit score or financial history.

Rates differ between subsidized and unsubsidized loans. For federal subsidized loans, the government pays your interest charges for you while you’re in school at least half -time, during your grace period and while you’re in deferment. The amount you’ll owe once your loan is in repayment will include only your original principal balance, loan fees and interest accrued moving forward.

With federal unsubsidized loans, interest charges accrue immediately after funds are disbursed. If you choose to hold off on making loan or interest-only payments until later, your student loan interest capitalizes.

As of Aug. 8, 2020, interest rates on federal student loans have been deferred through Dec. 31, 2020 due to impacts of the coronavirus.

How private student loan interest rates work

Private student loans are funded by banks, credit unions and lenders, so interest rates vary from lender to lender. Many private student loan lenders offer both fixed and variable rates, so your interest rate could fluctuate over the life of the loan if you choose a variable option.

Private student loan lenders typically evaluate your credit score, income and financial history to determine your interest rates. Generally, the better your financial health and credit score, the lower your interest rates will be. In order to access this information, many lenders will run a hard credit inquiry, which can knock your credit score down a few points.

How has the coronavirus affected student loan interest rates?

With the U.S. economy in a state of upheaval due to the coronavirus pandemic, interest rates have fallen to near-record lows for many financial products. Student loans are no exception; when the Fed cut interest rates in spring 2020, many private student loan companies lowered their interest rates on both fixed and variable products. Federal student loan rates for the 2020-21 school year were announced soon after, and they are some of the lowest rates in over a decade.

Thanks to the CARES Act and an executive order issued on Aug. 8, 2020, student loan interest payments on federal student loans are also waived through Dec. 31, 2020.

What affects federal student loan interest rates?

Lawmakers meet every spring to determine federal student loan interest rates for the subsequent school year, meaning federal student loan interest rates change year-by-year. New rates are set every year on July 1 and apply to student loans disbursed through June 30 of the following year.

Even though federal student loan rates may change from year to year, you likely won't see any impact of fluctuating interest rates on your current loans, since they're under a fixed rate. The interest rate you received the year you took out your loan is the interest rate that you will have for the entirety of your loan.

What affects private student loan interest rates?

Since federal student loan interest rates are fixed, you likely won't feel the impact of the Federal Reserve raising or lowering rates on your current student loans. However, if you have private student loans, you could feel the impact of the Fed hiking or cutting rates on any variable-rate loans. When the U.S. Central bank adjusts the federal funds rate, interest rates respond by periodically increasing or decreasing.

Your personal credit score and history also affects the interest rate that you receive on a private student loan. Your financial history tells a lender how well you've managed your existing debt and is an indicator of how risky you are as a borrower.

When looking for a private student loan with a competitive interest rate, shop around and compare rates and fees, since they can widely vary between lenders.

What affects refinancing interest rates?

When you refinance your student loans, you're taking out a new, private loan to pay off your student loan debt. You may be able to qualify for a lower interest rate and fees, saving money in the long run.

When the Federal Reserve announces rate cuts, it will likely impact refinancing interest rates, since refinancing is just a type of private loan. As with private student loan rates, your credit score, income and general financial health impact the interest rate you'll be offered, so it's important to shop around to find the best refinance loan for your financial situation.

How to calculate student loan interest

Calculating your student loan interest can help you determine your monthly budget. To calculate how much interest you pay each month, use the following steps:

  1. Find your daily interest rate. Divide your annual interest rate by 365.
  2. Determine your daily interest accrual charge. Multiply your daily interest rate by your remaining principal balance.
  3. Calculate your monthly payment. Multiply that daily interest accrual by the number of days in your billing cycle.

Let's say you're charged 5 percent interest on your $10,000 loan every month. Here's what those steps look like:

  1. 0.05 (annual interest rate) / 365 = 0.000137
  2. $10,000 (principal balance) x 0.000137 = 1.37
  3. 1.37 x 30 (number of days in billing cycle) = $41.10

In this scenario, you'll pay $41.10 in interest each month.

Keep in mind that some private loans do carry a variable rate, so the daily interest rate may fluctuate over the life of the loan. You can also use Bankrate's student loan calculator to calculate your monthly interest charge.

The difference between subsidized and unsubsidized student loans

Federal student loans can be either subsidized or unsubsidized. The primary difference between the two options is the way you'll pay the interest, your total debt after graduation and your repayment plan.

If you qualify for Direct Subsidized Loans, the Department of Education covers the cost of interest during a specific period of time. If you borrow a Direct Unsubsidized Loan, you'll be responsible for paying interest for the entirety of the loan.

Here are some other differences to be aware of:

Unsubsidized Loans
Subsidized Loans
Who pays interest costs?
The borrower
The Department of Education pays interest while the student is enrolled in school, during the six-month post-graduation grace period and during deferment. The borrower pays interest during regular repayment periods.
What’s the lifetime maximum limit?

Undergraduate students: up to $31,000

Independent undergraduate students: $57,500

Graduate students: up to $138,500

Undergraduate students: Up to $23,000
What do you need to qualify
Does not require proof of financial need
Must demonstrate financial need
Who can borrow?
Undergraduate students, graduate students and professional degree students
Undergraduate students
Are there extra costs involved?
1.059% fee for loans disbursed before Oct. 1, 2020
1.059% fee for loans disbursed before Oct. 1, 2020

Subsidized loans can be less expensive because you don't pay interest while you're still enrolled at your school, while unsubsidized loans accrue interest the entirety of the loan. In order to qualify and receive financial aid, you'll need to fill out the FASFA form each year

What is the difference between fixed and variable rates?

Student loan interest rates can either be fixed or variable. Fixed interest rates don’t change over your loan term, so you’ll know upfront how much your total cost to borrow will be and what your monthly payments will look like. Federal student loans always offer fixed interest rates.

Private lenders can offer fixed or variable private student loans. Variable interest rates change based on market conditions, so your monthly payment may increase or decrease at any time. If you're considering a variable-rate loan, you'll have to decide if the potential for lower rates is worth the unpredictability.

Learn more: