Student Loan Interest Rates: Your Guide to Understanding the Numbers

The 2019-2020 federal student loan interest rates are currently 4.53% for undergraduate loans, 6.08% for unsubsidized graduate loans and 7.08% for direct PLUS loans. With roughly 70% of students taking out student loans to attend college—in a rising-interest-rate environment—it's important to understand how these loans can impact your finances.

Federal Student Loan Interest Rates: 2019-2020 School Year

Student loan interest rates will decrease for the 2019-2020 school year for all federal loan types disbursed between July 1, 2019 and July 1, 2020. The disbursement date for any student loan is the date on which you receive payment from the lender. Below, we have listed the current student loan rates on the available types of federal loans. Note that these percentages represent the amount of interest you will pay on an annual basis.

Student Loan Interest Rates From 2006-2018

Over the past 12 years, interest on federal student loans has ranged from 3.4% to 7.90%, depending on the type of loan. Although these student loan rates have fluctuated through the years, rates have been rising since 2016. To see a visual representation of how student loan interest rates have changed over time, we've provided a chart that illustrates the rate pattern for three types of student loans (direct subsidized, direct unsubsidized and direct PLUS) since 2006.

*Note that in the above chart we didn't include the historical rates for Stafford Loans or Federal PLUS Loans. Both loans were part of the Federal Family Education Loan Program (FFEL), which was terminated in 2010. However, we have included their historical rates from 2006 and on in our breakdown below.

Federal Direct Subsidized Loans

While direct subsidized loans are only available to college students with higher financial needs, they are preferable to unsubsidized loans in two significant ways: First, subsidized loans don't accrue interest during the time that you're attending school. Secondly, you are granted a six-month grace period post graduation before you're required to start making payments toward the student loan balance. However, direct subsidized loan interest rates are the same as their unsubsidized counterpart.

Undergraduate Direct Subsidized Student Loans

Graduate Direct Subsidized Student Loans

Federal Direct Unsubsidized Loans

Direct unsubsidized student loans are easier to qualify for than federal subsidized loans because you don't need to prove financial need. That being said, while the interest rates are identical, the terms for direct unsubsidized student loans aren't quite as good. You'll be responsible for paying the interest accumulated on the loan during the period you are in school. If you don't make these interest payments while in school, the aggregate amount of the interest payments will be tacked onto your total loan amount.

Undergraduate Direct Unsubsidized Student Loans

Graduate or Professional Direct Unsubsidized Student Loans

Federal Direct PLUS Loans

Direct PLUS student loans differ from other federal loan types in that they're more targeted toward graduate and professional students, in addition to parents who are helping their dependent children finance their education. While direct subsidized and unsubsidized student loans won't take your credit history into account, if you're looking to borrow a Direct PLUS loan, a poor credit history could mean that you aren't eligible. Additionally, Direct PLUS loan interest rates are higher than what you'll see for other federal student loans.

Direct PLUS Student Loans

Federal PLUS Student Loans

Private Student Loan Interest Rates

If you're looking for the best student loans to finance your college education, we always recommend that you start by looking at federal student loans first. Federal loan types offer the same fixed interest rate for every borrower and provide multiple repayment plans, which aren't typically offered by private lenders. However, if you've already taken out federal student loans but are still falling short of affording your dream college, then it may make sense to look at private student loan lenders to supplement your federal loans.

With that in mind, interest rates on private student loans can vary widely from lender to lender and also fluctuate based on several other factors, such as your credit score. We looked at five different private lenders to give you an idea of what your average student loan interest rate range may be on a private loan. Unlike federal student loans that have fixed rates, private loan interest rates are set by the lender and can vary based on a number of factors, including if you have a cosigner and the amount borrowed.

Student Loan Refinance Rates

If you already have student loans and are looking for better rates, refinancing could be a good option for you. However, if you plan to refinance your federal student loans, first consider the benefits you would be giving up, including income-driven repayment plans and student loan forgiveness. Still, you can explore student loan refinance lenders to see what would make the most sense for your student loans.

Keep in mind that interest rates are largely determined by your credit score, which indicates your ability to pay back the loan. If your credit score is not very high, you won't qualify for the lowest rates available and should consider working to improve your credit score before applying or using a cosigner. Below, we've listed some of the best student loan refinance lenders and their rates.