Average Student Loan Interest Rates & How They WorkJuly 5, 2021
Updated: April 15, 2022
If you are heading to college this fall, you may be thinking about taking out student loans to pay for at least some of your education. According to the Institute for College Access & Success, 62% of college graduates have student loan debt, owing an average of $28,950.
As a student loan borrower, it’s important to pay attention to interest rates, since they can affect your total repayment cost. Depending on the type of student loans you use, your interest rates could range from 1.20% to 12.45%.
Here are the typical student loan interest rates you can expect as of February 1, 2022:
|Loan Type||Student Loan||Borrower Type||Interest Rate|
|Federal||Federal Direct Subsidized and Unsubsidized Loans||Undergraduate||3.73%|
|Federal Direct Unsubsidized||Graduate or Professional||5.28%|
|Federal Direct PLUS||Graduate or Parent||6.28%|
|Private (ELFI)||Student Loans||Undergraduate or Graduate||
|Refinance (ELFI)||Student Refinancing||Undergraduate and Graduate||
|Parent Loan Refinancing||Parents||
[Note: If you have federal student loans, your loan payments are currently suspended, and your interest rate is set at 0% due to the CARES Act’s student loan relief measures. The CARES Act’s provisions will last until at least May 1, 2022. If you have private loans or loans that are ineligible for the CARES Act, refinancing can be a good way to reduce your interest rate.]
How Student Loan Interest Rates Work
New America reported that the average student loan interest rate for both federal and private loans is 5.8%. However, interest works differently depending on the types of student loans you have.
How Federal Loan Rates are Determined
The interest rates on federal loans are set by federal law, rather than the U.S. Department of Education or banks.
The interest rate on a federal loan is fixed, meaning it stays the same for your entire repayment term. The rate that is available at the time you take out the loan is what you’ll pay, even if the rate for that loan type changes over time.
Federal loan interest rates are adjusted based on market conditions. For example, the rate for Direct Subsidized Loans was 2.75% for the 2020-2021 academic year, and it increased to 3.73% for the 2021-2022 academic year.
How Private Loan Rates Are Determined
If you reach the borrowing limits for federal loans, private student loans can cover your remaining costs. Private loans make up a small percentage of the total outstanding education debt. Only about 5% of undergraduate students use private student loans to pay for college
While the interest rate on federal loans is determined by federal law, the interest rate on private loans is determined by the individual lender. Most student loan lenders base their rates on the LIBOR, and rates may change as the market fluctuates.
Unlike federal student loans — which always have fixed interest rates — private student loans can have variable or fixed rates. While fixed rates have the same interest rate for the duration of your repayment period, variable-rate loans work differently.
Variable-rate loans tend to have lower interest rates than fixed-rate loans at first. Over time, the interest rate can increase and decrease along with market conditions. When the interest rate changes, your monthly payment will change, too.
How Refinancing Loan Rates Are Determined
Like private student loans, refinancing loans are issued by individual banks and lenders. The lenders determine their own interest rates, usually using the LIBOR as a guide. Refinancing loans can have fixed or variable interest rates.
Federal Student Loan Interest Rates for the 2021-2022 Academic Year
If you’re wondering about typical student loan interest rates, you should know that all federal loan borrowers get the same interest rate, regardless of credit score or income. All federal loan borrowers must also pay a disbursement fee that is deducted from the loan amount when it’s issued to you.
The following rates and fees apply to federal loans disbursed between July 1, 2021, and July 1, 2022.
|Student Loan||Type||Interest Rate||Disbursement Fee|
|Federal Direct Subsidized and Unsubsidized Loans||Undergraduate student loans||3.73%||1.057%|
|Federal Direct Unsubsidized||Graduate student loans||5.28%||1.057%|
|Federal Direct PLUS||Graduate or Parent||6.28%||4.228%|
As you can see, graduate and parent student loans have higher interest rates than other federal loans. If you have a high interest rate and want to save money or pay off your debt faster, graduate or Parent PLUS Loan refinancing can be a useful solution.
Current Private Student Loan Interest Rates
If you reach the federal student loan maximum limit, are not eligible for federal loans, or are shopping for the lowest possible interest rates, private student loans can be effective financing options.
Rates vary by lender and are based on your credit, income, and requested loan amount. With ELFI, the following rates are available as of April 1, 2022:
|Student Loan||Borrower Type||Interest Rate*|
|Student Loans||Undergraduate or Graduate||
As a college student, you may not have enough income or credit to qualify for a private student loan on your own. However, you may still be able to acquire a loan by applying for one with a cosigner. A cosigner is a friend, parent, or relative with excellent credit and a stable income who shares responsibility for the loan. Adding a cosigner can improve your chances of getting approved and securing a lower interest rate.
Current Student Loan Refinancing Interest Rates
If you have high-interest student loans, refinancing may allow you to reduce your student loan interest rate. Over time, refinancing can help you save money or pay off your student loans faster. Or, you can reduce your payments by opting for a longer repayment term.
Like private student loans, refinancing interest rates are set by individual lenders and can vary by company. On average, borrowers who refinance their loans with ELFI save an average of $286 every month.1
With ELFI, the following student loan refinancing interest rates apply as of April 1, 2022:
|Refinancing Type||Borrower Type||Interest Rate|
|Student Refinancing||Undergraduate and Graduate||
|Parent Loan Refinancing||Parents||
If you think that refinancing is right for you but aren’t sure where to start, check out this guide on how to refinance student loans.
Student Loan Refinancing Interest Rates by Lender
|Fixed Rates APR|
5.08% - 8.04%
4.99% - 9.99%
4.96% - 8.99%
4.99% - 9.40%
|Variable Rates APR|
5.03% - 8.74%
5.74% - 9.99%
5.15% - 8.94%
4.74% - 9.30%
5, 7, 10, 15, or 20 years
5, 7, 10, 15, or 20 years
5 to 20 years
5, 7, 10, 15, or 20 years
|US News Rating|
Rates and scores in this chart were obtained from lenders’ and aggregators’ websites on 6/01/2023. All information and rates are subject to change at any time. Please see each lender’s website for current information.
How to Get a Good Interest Rate on Student Loans
While federal loans have the same interest rates for all borrowers, the interest rate on private loans and refinancing loans are based on several factors. To get the lowest rate possible, consider these tips:
- Review your credit: Lenders generally look for borrowers with good to excellent credit, meaning a score of 670 and above. If your score is lower than that, focus on improving your score before applying for a loan.
- Boost your income: Most lenders have minimum income requirements and will look for your debt payments to be a small percentage of your gross income. If your income is too low, try to increase it by switching jobs or getting a side hustle.
- Pay down existing debt: When considering your application, lenders will look at how much of your income goes toward debt, such as your credit card payments. To improve your odds of getting a loan, pay down any existing balances you have.
- Choose a shorter loan term: The lowest rates are typically given to borrowers who choose shorter loan terms, such as five to eight years.
- Add a cosigner to your application: Adding a cosigner that has excellent credit and a relatively high income can allow you to get a lower interest rate than you’d get on your own.
ELFI’s Private Student Loans & Student Loan Refinancing
A common question borrowers have is, “What is a good student loan interest rate?” By considering the national averages and typical student loan interest rates for federal and private loans, you can make an informed decision.
If you’re looking for a loan, ELFI offers both private student loans** and student loan refinancing.***
You can use the student loan repayment calculator to estimate your payments and total repayment cost of your loan based on your interest rate. Or, use the student loan refinancing calculator to see how much you can save by refinancing your existing loans.
1Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 11/01/2021 and 12/15/2021. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.
*Based on rates from https://www.elfi.com/. Rates are accurate as of 4/1/2022.
**Education Loan Finance is a nationwide student loan provider offered by Tennessee-based SouthEast Bank. ELFI is designed to assist students financially with receiving their education. Subject to credit approval. See Terms & Conditions. Interest rates current as of 4-1-2022. Variable interest rates may increase after closing but will never exceed 18.00%. Interest rates may also differ from the rates shown above. The term of your loan, financial history, and other factors, including your cosigner’s (if any) financial history can affect the interest rate. For example, a 10-year loan with a fixed rate of 7% would have 120 payments of $11.61 per $1,000 borrowed. Rates are subject to change.
***Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 4-1-2022. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. See Eligibility Requirements for more information. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.10 per $1,000 borrowed. Rates are subject to change.