What Is the Average Interest Rate on Student Loans in 2024?

Navigating the maze of student loans can be overwhelming, especially when it comes to deciphering interest rates. Being informed about the average interest rates on both federal and private student loans is crucial for making educated decisions about funding your education.

When I was applying to colleges, I didn’t appreciate how much the interest rate on my loans would affect my financial situation down the road. After doing some research, however, I was able to pick the lowest-rate loans available to me and set myself up for future success. Let's break down the key information you need to make smart borrowing choices.

Key takeaways

• Federal student loan interest rates for 2024-2025 are determined based on the 10-year Treasury note auction and have increased compared to previous years
• Private student loan interest rates vary widely based on creditworthiness, loan terms, and lender policies
• Understanding these rates can help you make smarter borrowing decisions and manage your debt effectively

Federal student loan interest rates

For the 2024-2025 academic year, the federal student loan interest rates are as follows:

• Direct Subsidized and Direct Unsubsidized Loans for Undergraduate Students: 6.53%.
• Direct Unsubsidized Loans for Graduate or Professional Students: 8.08%.
• Direct PLUS Loans for Parents and Graduate or Professional Students: 9.08%.

These rates are effective for loans disbursed between July 1, 2024 and June 30, 2025, and are determined based on the 10-year Treasury note auction in May plus a fixed add-on percentage set by the government. Subsidized loans have the lowest add-on at 2.05% while PLUS loans have the highest at 4.60%.

It's important to note that federal loan interest rates are fixed, meaning they won't change over the life of the loan.

TuitionHero Tip

Did you know the interest rates for federal student loans are capped by Congress. For example, undergraduate Direct Loans have a maximum interest rate of 8.25%, ensuring that rates remain within a manageable range for borrowers. Direct loans for graduates are capped at 9.5%, while Direct PLUS loans are capped at 10.5%.

Private student loan interest rates

Unlike federal loans, private student loan interest rates are set by individual lenders and can vary significantly based on several factors:

• Creditworthiness: Your credit score plays a major role in determining the interest rate you're offered.
• Loan terms: The length of the loan and whether you choose a fixed or variable rate can affect the rate.
• Market conditions: Interest rates can fluctuate based on economic trends.

As of April 2024, private student loan interest rates typically range:

• Fixed interest rates: Approximately 3.45% to 17.99%.
• Variable interest rates: Approximately 4.50% to 17.99%.

TuitionHero Tip

Keep in mind that securing the lowest rates typically requires a strong credit history or a creditworthy cosigner. Some private lenders also consider your income or employment history when determining rates.

Average interest rates

Calculating the exact average interest rate for all student loans is challenging due to the diversity of loan types and borrower profiles. However, some estimates can provide a general idea:

• The average interest rate among all student debt was approximately 6.87% in 2024, which includes both federal and private loans from previous years.
• For new federal loans in 2024, the average rate would align with the fixed rates set for each loan category as determined by federal law.

Understanding these averages can help you gauge where your loan rates fall in comparison to national figures.

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Why trust TuitionHero

TuitionHero simplifies understanding student loan interest rates for 2025, highlighting federal and private loan differences, average rates, and tips for securing the best deal. Navigate your borrowing decisions with confidence and optimize your education financing strategy.

Frequently asked questions (FAQ)

What factors influence private student loan interest rates?

Private student loan interest rates are influenced by the borrower's credit score, income, and debt-to-income ratio, as well as the lender's terms and current market conditions. Having a cosigner with strong credit can help you secure a lower rate.

Is it possible to refinance federal student loans into private loans for a better rate?

Yes, you can refinance federal student loans into a private loan, potentially securing a lower interest rate. However, you'll lose federal benefits like income-driven repayment plans and loan forgiveness options. Carefully weigh the pros and cons before making this decision.

How can I secure the lowest possible interest rate on a private student loan?

To secure the lowest possible rate, maintain a strong credit score, consider a cosigner, and compare offers from multiple lenders. Additionally, choosing a shorter repayment term or enrolling in automatic payments may qualify you for rate discounts.

Do interest rates change after I take out a student loan?

For federal student loans, interest rates are fixed and won't change over the life of the loan. Private student loans may have fixed or variable rates. Variable rates can change over time based on market conditions, potentially increasing your cost.

Are there any fees associated with federal student loans besides interest?

Yes, federal student loans often come with origination fees. For all Direct Subsidized and Unsubsidized Loans disbursed on or after October 1, 2020 have a loan fee of 1.057%. This fee is deducted from each loan disbursement.

Final thoughts

Understanding the average interest rates on student loans in 2025 is essential for effective financial planning. By staying informed about both federal and private loan rates, you can make educated decisions that align with your long-term goals. Remember to explore all your options, consider the total cost of borrowing, and consult with financial aid advisors or professionals when necessary.

Source

• Current Student Loan Interest Rates
• Student Loan Interest Rates
• Current Interest Rates for Student Loans
• Student Loan Interest Rates and Fees
• Average Student Loan Interest Rate
• Caps on Interest Rates
• Origination Fees
• Interest Rates for Direct Loans