Federal Student Loan Rates Hit 6.39% for 2025–26: Should You Consider a 4.49% Private Loan Instead?

Are federal student loans still the best deal in town? With the 2025–26 direct undergraduate loan interest rate climbing to 6.39%, many students are doing a double-take.

For years, federal loans were the go-to option because of their benefits. But today, some private lenders offer fixed rates of 4.49% or lower. So, does it ever make sense to pass up federal protections in favor of private savings?

In this post, we’ll explore why federal loan rates are rising, what perks you lose with private loans, and why—in some cases—a lower private rate might still be the smarter financial move.

Key takeaways

• Federal student loan interest rates for undergrads are now 6.39%, one of the highest rates in the past decade
• Some private lenders offer rates as low as 4.49% fixed, which could save you thousands over the life of the loan
• Federal loans come with flexible repayment options and forgiveness programs, which private loans do not

Why did federal student loan rates increase?

Federal student loan interest rates are tied to the 10-year U.S. Treasury yield. Each spring, the government sets the new rate by adding a fixed margin to that yield.

This year, high inflation and continued economic uncertainty kept Treasury yields elevated. While loan rates are down slightly from last year, they’re still at one of the highest levels in the past ten years.

TuitionHero Tip

Federal rates are fixed, meaning they stay the same for the life of the loan, but they change every year for new borrowers.

What are the pros of federal student loans?

Federal loans come with built-in borrower protections that make them attractive, especially if you anticipate financial instability or plan to pursue public service.

Key federal loan benefits include:

• Income-driven repayment (IDR): Payment plans based on your income and family size.
• Forgiveness programs: Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and more.
• Deferment and forbearance options: Pause payments during hardship, school, or service.
• No credit check for undergrad loans: Easier access for those with limited credit history.

TuitionHero Tip

If you’re unsure about your future income or career path, federal loans offer more flexibility and safety nets

When do private loans offer better value?

Private loans may be worth considering if:

• You have excellent credit or a strong co-signer.
• You’re confident in your future income potential.
• You can qualify for a lower interest rate to reduce long-term costs.
• You aren’t eligible for federal subsidies (like parents or graduate students taking out PLUS Loans).

A 4.49% fixed private loan versus a 6.39% federal loan on $20,000 over 10 years could result in a difference of over $2,200 in interest savings.

Curious for the latest private student loan rates? Check out our comprehensive dashboard to compare the best options.

If you’re a highly qualified borrower, you may be eligible for rates of 4.49% or lower. What’s more, most lenders offer both fixed and variable loans for added customization.

But beware: Private loans lack forgiveness options, and many don’t offer flexible repayment terms.

Compare private student loans now

TuitionHero simplifies your student loan decision, with multiple top loans side-by-side.

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Compare Rates

How to compare federal and private loan costs

Here’s a quick comparison to help you decide:

TuitionHero tips for smart borrowing

• Always fill out the FAFSA first. Federal aid (like Pell Grants and Subsidized Loans) should come first.
• Only borrow what you need. Don’t treat student loans like extra spending money.
• Compare multiple lenders. Even among private lenders, rates and repayment options vary.
• Read the fine print. Watch for origination fees, prepayment penalties, and cosigner release policies.
• Consider refinancing later. You can’t refinance federal loans into new federal loans, but you can refinance private loans (or convert federal to private) after graduation if your credit improves.

Why trust TuitionHero

At TuitionHero, we help you find the best private student loans by comparing top lenders and breaking down eligibility, interest rates, and repayment options. Whether you need additional funding beyond federal aid or a loan without a cosigner, we simplify the process. We also provide expert insights on refinancing, FAFSA assistance, scholarships, and student credit cards to support your financial success.

Frequently asked questions (FAQ)

Should I skip federal loans entirely now that rates are higher?

Not necessarily. Federal loans still offer unmatched protections. But it may be worth comparing private loans, especially if you’re ineligible for need-based federal aid and can qualify for lower rates.

Can I refinance a federal loan into a lower-rate private loan later?

Yes, if your credit is good enough to qualify, but you’ll lose access to IDR and forgiveness programs. Make sure you won’t need those benefits before refinancing.

Is a private loan rate of 4.49% really better than 6.39% federal?

In terms of raw interest cost, yes. But the loss of federal flexibility and protections makes it a case-by-case decision.

How do I know if I qualify for a 4.49% private rate?

You’ll need excellent credit or a creditworthy cosigner. Most private lenders offer prequalification tools with no impact on your score.

What happens if I can’t repay a private loan?

Private lenders are less forgiving. There are no standardized hardship options, so private loans are riskier than federal loans in uncertain times.

Final thoughts

Federal student loan rates at 6.39% are a wake-up call for students and families. While federal loans still provide crucial borrower protections, some private loans now offer better raw savings—if you qualify and understand the trade-offs.

Before signing on the dotted line, compare your options carefully. Whether it’s finding the right loan, refinancing later, or exploring repayment strategies, TuitionHero is here to help you navigate it all.

Source

• Federal student loan interest rates fell for the first time in 5 years
• Good News for College Students: You May See a Dip in Student Loan Rates - The New York Times
• (DL-25-03) Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026