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Student loan interest rates in November 2022
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Student loans can be useful for filling financial gaps when paying for higher education expenses, but the money isn't free. Student loan interest rates determine how much money you’ll ultimately owe. It’s important to know what your interest rate is and how it affects your loans.
Federal student loans for undergraduates currently have an interest rate of 4.99 percent for the 2022-23 school year, while graduate students have interest rates of 6.54 percent or 7.54 percent for unsubsidized loans or Direct PLUS loans, respectively. Private student loan interest rates range from 2 percent to 14 percent and are based primarily on your credit score.
Current student loan interest rates
About 92 percent of student loan debt is federal, with interest rates ranging from 4.99 percent to 7.54 percent. Average private student loan interest rates, on the other hand, can range from 3.22 percent to 14.96 percent fixed and 2.52 percent to 12.99 percent variable.
While federal student loan rates are the same for every borrower, private student loan rates range based on the lender, the type of interest rate (fixed or variable) and the borrower's credit score.
| LOAN TYPE | BORROWER | FIXED INTEREST RATE | LOAN FEE |
|---|---|---|---|
| Direct Subsidized Loans and Direct Unsubsidized Loans | Undergraduate students | 4.99% | 1.057% for loans first disbursed on or after Oct. 1, 2020, and before Oct. 1, 2023 |
| Direct Unsubsidized Loans | Graduate or professional students | 6.54% | 1.057% for loans first disbursed on or after Oct. 1, 2020, and before Oct. 1, 2023 |
| Direct PLUS Loans | Parents and graduate or professional students | 7.54% | 4.228% for loans first disbursed on or after Oct. 1, 2020, and before Oct. 1, 2023 |
| LENDER | FIXED APR* | VARIABLE APR* |
|---|---|---|
| College Ave | 3.99% to 14.96% | 3.24% to 14.86% |
| Earnest | 3.99% to 12.78% | 3.58% to 12.28% |
| LendKey | 3.99% to 10.32% | 4.36% to 10.24% |
| SoFi | 4.99% to 14.75% | 4.49% to 13.82% |
*Includes autopay discount. Interest rates as of Oct. 19, 2022.
Compare lenders: Private student loan rates
| LENDER | FIXED APR* | VARIABLE APR* |
|---|---|---|
| College Ave | 4.49% to 7.99% | 3.69% to 7.99% |
| Earnest | 3.99% to 8.99% | 3.24% to 7.99% |
| LendKey | 3.99% to 10.68% | 3.27% to 6.87% |
| SoFi | 4.49% to 8.99% | 4.49% to 8.99% |
*Includes autopay discount. Interest rates as of Oct. 19, 2022.
Compare lenders: Refinance student loan rates
Federal student loan rates change every year. Here's a historical overview of how average student loan rates have evolved.
| LOAN FIRST DISBURSED | UNDERGRADUATE DIRECT SUBSIDIZED LOANS | UNDERGRADUATE DIRECT UNSUBSIDIZED LOANS | GRADUATE OR PROFESSIONAL DIRECT UNSUBSIDIZED LOANS | DIRECT PLUS LOANS |
|---|---|---|---|---|
| July 1, 2022 – June 30, 2023 | 4.99% | 4.99% | 6.54% | 7.54% |
| July 1, 2021 – June 30, 2022 | 3.73% | 3.73% | 5.28% | 6.28% |
| 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% |
How are student loan interest rates set?
Federal student loan interest rates and private student loan interest rates are closely related. When federal student loan rates drop, private student loan rates are likely to follow. This is because both types of loans tend to follow larger economic market trends.
Federal student loan interest rates
Each spring, Congress sets federal student loan interest rates based on the high yield of the last 10-year Treasury note auction in May. New rates apply to student loans disbursed from July 1 to June 30 of the following year. Federal loans 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.
Interest charges 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 you start paying includes only your original principal balance, loan fees and interest accrued moving forward.
With federal unsubsidized loans, interest charges start accruing immediately after funds are disbursed. If you choose to hold off on making loan payments until after graduation or your six-month grace period, the accumulated student loan interest gets added to your principal balance when the loan enters repayment.
With that said, interest rates on federal student loans are temporarily set to zero until June 30, 2023 or the current litigation over the federal student loans forgiveness program is resolved.
Private student loan interest rates
Private student loans are offered by banks, credit unions and online lenders. Interest rates vary from lender to lender. Many private student loan lenders provide both fixed and variable rate. Your interest rate could fluctuate and may increase over the life of the loan if you choose a variable-rate option.
Most student loan lenders set rate ranges based on the Libor or the Secured Overnight Financing Rate indices.
However, while rates are tied to this benchmark, private lenders also typically evaluate you or your co-signer's credit score, income and financial history to determine your interest rate. 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. However, you can usually prequalify and get a preview of your rates and terms with only a soft credit check.
To make loans more accessible, some lenders also factor in your work and academic history, potential future earnings and more.
How has the coronavirus affected student loan interest rates?
When the coronavirus hit in March 2020 and the Federal Reserve Board cut interest rates, student loan rates plummeted. Federal student loan rates were at their lowest point in years, and borrowers could take out private student loans or refinance existing loans with rock-bottom rates as well. Also, federal student loan interest is waived until the ongoing litigation concerning student loan forgiveness is resolved or through June 30, 2023.
However, as the economy recovers from the pandemic, the Fed has been regularly raising rates — five times so far in 2022. These rate increases drive higher interest rates across sectors. Federal student loan interest rates are up more than a percentage point for the 2022-23 school year, and private student loan rates are also starting to rise again. Rates will likely continue to rise as 2022 progresses.
How will student loan rates change in 2022?
Student loan interest rates are expected to rise throughout 2022. The federal funds rate increased by 75 basis points in June and again in September. Fed officials predict further increases in November and December. This could translate to higher student loan rates for both federal and private products.
The Biden presidency's affect on student loans
While the president has no say in student loan interest rates, President Joe Biden has been seeking other ways to make college more affordable for students and reduce student debt burden. In August 2022, he announced a plan to forgive up to $20,000 in federal student loan debt for millions of eligible students.
Individuals who made less than $125,000 in 2020 or 2021 and married people who file taxes jointly and made less than $250,000 are eligible for up to $10,000 in federal debt relief each. Up to $20,000 will be forgiven if you meet income requirements and you've ever received a Pell Grant.
Unfortunately, this one-time forgiveness does not extend to private student loans (with the exception of FFEL or Perkins Loans consolidated before Sept. 29, 2022). Additionally, it only applies to loans taken out before June 30, 2022. The program is on hold as of Nov. 2022 due to ongoing litigation.
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:
-
- Find your daily interest rate. Divide your annual interest rate by 365.
- Determine your daily interest accrual charge. Multiply your daily interest rate by your remaining principal balance.
- 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:
-
- 0.05 (annual interest rate) / 365 = 0.000137
- $10,000 (principal balance) x 0.000137 = 1.37
- 1.37 x 30 (number of days in billing cycle) = $41.10
In this scenario, you'll pay $41.10 in interest your first month. As you pay down the principal balance, less of your monthly payment will go toward interest.
Keep in mind that some private loans carry a variable rate, so the daily interest rate may fluctuate over the life of the loan. You can also use a 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 are the way you'll pay the interest and your total debt after graduation. Unsubsidized loans start accruing interest immediately after they're disbursed, while with subsidized loans, interest is not charged until you enter repayment.
Direct Unsubsidized Loans:
- Who pays interest costs? The borrower.
- What's the lifetime maximum limit? $31,000 for dependent undergraduate students, $57,500 for independent undergraduate students and $138,500 for most graduate or professional students.
- Do you need to demonstrate financial need? No.
- Who can borrow? Undergraduate students, graduate students and professional degree students.
- Are there extra costs involved? 1.057 percent fee for loans disbursed on or after Oct. 1, 2020, and before Oct. 1, 2023.
Direct Subsidized Loans:
- Who pays interest costs? The U.S. Department of Education pays interest while the student is enrolled in school at least half time, during the six-month postgraduation grace period and during deferment. The borrower pays interest during regular repayment periods.
- What's the lifetime maximum limit? $23,000.
- Do you need to demonstrate financial need? Yes.
- Who can borrow? Undergraduate students.
- Are there extra costs involved? 1.057 percent fee for loans disbursed on or after Oct. 1, 2020, and before Oct. 1, 2023.
The difference between fixed and variable rates
Student loan interest rates can be either fixed or variable. Fixed interest rates are a type of interest rate that doesn'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. All federal loans have fixed rates.
Variable interest rates are a type of interest rate that changes based on market conditions, so your monthly payment may increase or decrease periodically. These changes typically happen on a monthly, quarterly or annual basis.
How can I reduce my student loan interest rate?
If you're looking to lower your student loan interest rate, you have a few options:
- Improve your credit score before applying: If you're applying for a loan from a private lender, you'll likely go through a credit check. The better your credit score, the lower the rate you'll receive. Before applying, check your credit reports for errors and avoid applying for other forms of credit.
- Apply with a co-signer: Many student loan borrowers don't have much credit to their name. If this is your situation, you may want to add a co-signer to your loan. Adding a co-signer with good credit will improve your creditworthiness and could help you get lower rates. Some lenders require a co-signer, especially for undergraduate borrowers.
- Choose a variable rate: It's a gamble, but choosing a variable rate over a fixed one could cause your interest rate to drop during economic downturns. However, keep in mind that you also risk your interest rate rising.
- Refinance old loans: If you took out a student loan when interest rates were high, you may be able to refinance into a lower interest rate. This is especially true if you have a better credit score now than when you first applied. Just remember that if you refinance a federal student loan, you'll lose benefits like coronavirus forbearance and income-driven repayment plans.
How to pay off student loan interest
- Opt for interest-only payments while in school. Though you're not required to make payments while you're in school, many lenders offer the option of making interest-only payments. This prevents interest accrual. Some also allow you to make small payments against the principal.
- Make biweekly payments. If you can afford it, try making half-payments on your loans every two weeks instead of one full payment every month. This helps you pay off your loans faster and puts more of your payment toward the principal rather than interest.
- Put any extra funds toward your student loans. If you receive a tax refund or another one-time sum of money, send it to your lender and specify that you want to put it toward your principal amount. This is a good way to decrease your loan amount and the total amount of time you spend paying your loans, which cuts down on how much interest you pay overall.
Next steps
If you're considering taking out a student loan, the best way to find a good interest rate is to shop around with multiple lenders. It's usually best to start your search with federal student loans, but private student loans are a good way to supplement. While you will be charged higher interest rates if your credit score needs work, there are lenders that cater specifically to borrowers with bad credit.