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Student Loan Interest Rates
Student loan interest rates can be difficult to understand. It helps to have a few key terms explained first.
Your interest rate will be either fixed or variable. Your actual interest rate will depend on:
- When your loan was first disbursed.
- The type of loan.
- Whether it is subsidized (meaning interest doesn’t accrue while you are in school, a grace period, or an authorized deferment) or unsubsidized (meaning interest will continuously accrue), if you have a Stafford loan.
- Whether your loan is part of the Federal Family Education Loan Program (FFELP) or Direct Loan program.
- Whether you are an undergraduate or graduate student.
A fixed interest rate means that it will remain the same over the life of your loan.
A variable interest rate typically means that it will fluctuate over the life of your loan based on the change to an index that reflects changes in the market rates of interest. Variable rate loans typically change rates every July 1.
You may also check the interest rate on your federal college loans at nslds.ed.gov.
Loan Types and Interest Rates
As of July 1, 2013, Stafford loan interest rates will be variable, but unlike other loans with variable rates, these Stafford loans will have a locked in rate for the life of the loan. On July 1 of each year, undergraduate subsidized and unsubsidized Stafford loans will have an interest rate of the 10-year Treasury index rate plus 2.05%. Graduate unsubsidized Stafford loans will have an interest rate of the 10-year Treasury index rate plus 3.6%.
|First Disbursed When?||Undergraduate Subsidized Stafford Loan||Undergraduate Unsubsidized Stafford Loan||Graduate Unsubsidized Stafford Loan|
|On or after July 1, 2013, and before July 1, 2014||Fixed at 3.9%||Fixed at 3.9%||Fixed at 5.4%|
|On or after July 1, 2011, and before July 1, 2013||Fixed at 3.4%||Fixed at 6.8%||Fixed at 6.8%|
|On or after July 1, 2010, and before July 1, 2011||Fixed at 4.5%||Fixed at 6.8%||Fixed at 6.8%|
|On or after July 1, 2009, and before July 1, 2010||Fixed at 5.6%||Fixed at 6.8%||Fixed at 6.8%|
|On or after July 1, 2008, and before July 1, 2009||Fixed at 6.0%||Fixed at 6.8%||Fixed at 6.8%|
|On or after July 1, 2006, and before July 1, 2008||Fixed at 6.8%||Fixed at 6.8%||Fixed at 6.8%|
PLUS loans can cover expenses not met by other financial aid. These loans can be taken out by dependent students’ parents or by graduate students.
As of July 1, 2013, Parent and Grad PLUS loan interest rates will be variable, but unlike other loans with variable rates, these PLUS loans will have a locked in rate for the life of the loan. On July 1 of each year, Parent and Grad PLUS loans will have an interest rate of the 10-year Treasury index rate plus 4.6%.
|First Disbursed When?||Direct Loan||FFELP Loan|
|On or after July 1, 2013, and before July 1, 2014||Fixed at 6.4%||N/A|
|On or after July 1, 2006, and before July 1, 2013||Fixed at 7.9%||Fixed at 8.5% (No FFELP loans were made after July 1, 2010)|
|On or after July 1, 1998, and before July 1, 2006||Variable rate set at 3.19% beginning July 1, 2012||Variable rate set at 3.19% beginning July 1, 2012|
Perkins loans are subsidized federal loans provided by universities and colleges to students with exceptional financial need. They are available to undergraduate and graduate students. Interest rates for Perkins loans are fixed at 5%; however, no capitalization occurs.
A Consolidation loan combines several student loans into a new loan from a single lender. The new Consolidation loan is used to pay off the balances on the old loans.
|Application Received by Loan Originator||How Interest Rate Is Established|
|On or after October 1, 1998 (for borrowers in repayment)||A weighted average of the rates being charged on loans being consolidated. Average is rounded up to the nearest 1/8%|
Private, Institutional, and State Loans
While federal student loans have standard interest rates set by the federal government, private, institutional, and state loan terms can vary greatly.
- Private loans are provided by private banks or credit unions, and they generally have variable interest rates set by the lender. Contact your lender to learn more.
- Institutional loans are provided by your school, and they can have variable or fixed interest rates set by the school. Contact your school to learn more.
- State loans are loans provided through state-funded programs, and their interest rates vary depending on the state you are in. Contact your servicer or state's office of education to learn more.
Consolidation loan interest rates are calculated by using the process below.
As an example, if you were in repayment on a loan of $5,000 at 6.8% and a loan of $10,000 at 6.0%, your rate would be 6.375%. Here is why:
- The amount you owe on each loan is multiplied by its respective interest rate (5,000 x 0.068 = 340; 10,000 x 0.06 = 600).
- These amounts are then added together (340 + 600 = 940).
- This total is divided by the total amount you owe (940 / 15,000 = 0.063).
- Multiplied by 100, this number creates your weighted average interest rate (100 x 0.063 = 6.3).
- Your weighted average is then rounded up to the nearest 1/8% percent (6.3 + 0.075 = 6.375).
Keep in mind that rates are capped at 8.25%.