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| Loan Type | Fixed APR | Variable APR |
|---|---|---|
| Undergraduate and Graduate | 3.39% to 17.99% | 4.13% to 17.99% |
| Refinance | 3.85% to 11.69% | 4.35% to 12.37% |
Federal student loans don’t take into account credit scores and income. However, these factors play a big role in private lenders’ decisions. Students who don’t meet lenders’ credit requirements will need a co-signer. Over 90% of newly originated undergraduate private student loans were made with a co-signer in 2022–2023.
However, even if you don’t have a good credit score or a co-signer, there are lenders that offer student loans for bad credit and student loans without a co-signer.
Tip
Try to take out no more in student loans than what you expect to make in your first year out of school.
Federal Student Loan Interest Rates
Between July 1, 2024, and June 30, 2025, federal student loan rates for new undergraduate loans are 6.53%. New graduate loan rates are 8.08% and new parent PLUS loan interest rates are 9.08% during that same time period. These rates change annually.
There is an origination fee of 1.057% for federal direct subsidized loans and direct unsubsidized loans. The origination fee is higher at 4.228% for parent PLUS loans. This fee isn’t added to your repayment. Instead, it’s deducted from your initial loan disbursement.
College Enrollment Trends
In the fall of 2020, colleges and universities re-opened their classrooms and dorm rooms after going remote due to the pandemic. But within weeks, many schools had to once again postpone sports and other activities as widespread quarantines forced them to switch from in-person classes back to virtual ones.
As the pandemic dragged on, many thought that community colleges would see higher enrollment, but data showed that fall enrollment was up for some large public universities, while enrollment at community colleges was down as much as 30% at some institutions.
By the spring of 2022, enrollment continued to exhibit worsening trends, with total post-secondary enrollment falling to around 16.2 million, a one-year decline of 4.1%. This followed a 3.5% drop the year prior. The bulk of the drop was in undergraduate enrollment, down 4.7% from the previous year. The number of individuals enrolled in undergraduate programs was down 9.4% from before the pandemic.
Enrollment began to stabilize in fall 2022, but combined undergraduate and graduate enrollment was still 5.8% lower than in 2019. Enrollment rose by 2.5% in the spring of 2024, which marked the second consecutive semester of growth after the pandemic.
Student Debt Continues to Rise
Following the 2007–2008 Great Recession, state higher education funding fell a full 25%. The share of higher education revenues paid by students rose from 36% in 2008 to 47% in 2012. This has led to federal student loan debt that’s surpassed $1.6 trillion as of Q4’24.
While student debt is an ongoing issue, some borrowers may be able to get relief through student loan forgiveness programs.
Borrowers working toward forgiveness under the Public Service Loan Forgiveness (PSLF) program and on an income-driven repayment (IDR) plan may get their remaining balance forgiven after 120 qualifying payments are made.
Fast Fact
The Saving on a Valuable Education (SAVE) plan would set monthly payments for undergraduate student loan borrowers at 5% of discretionary income, unpaid interest would not be capitalized, and those with balances under $12,000 could receive loan forgiveness after 10 years of payments. However, on July 18, 2024, a federal appeals court blocked the SAVE plan until two court cases centered around the IDR plan can be resolved. The Department of Education has moved borrowers enrolled in the SAVE plan into an interest-free forbearance while the litigation is ongoing. It has also outlined options for borrowers who were nearing PSLF—borrowers can either “buy back” months of PSLF credit if they reach 120 months of payments while in forbearance or switch to a different IDR plan.
How Is Student Loan Interest Calculated?
The interest on student loans can be calculated as either compound or simple interest, depending on the lender. Federal student loans and most private student loans use a simple interest formula to calculate student loan interest. This formula consists of multiplying your outstanding principal balance by the interest rate factor and multiplying that result by the number of days since you made your last payment.
- Interest Amount = (Outstanding Principal Balance × Interest Rate Factor) × Number of Days Since Last Payment
The interest rate factor is used to calculate the amount of interest that accrues on your loan. It is determined by dividing your loan’s interest rate by the number of days in the year.
How Are Student Loan Interest Rates Calculated?
Federal student loan interest rates are determined by the 10-year Treasury note auction every May, plus a fixed increase with a cap.
- Direct unsubsidized loans for undergraduates: 10-year Treasury + 2.05%, capped at 8.25%
- Direct unsubsidized loans for graduates: 10-year Treasury + 3.60%, capped at 9.50%
- Direct PLUS loans: 10-year Treasury + 4.60%, capped at 10.50%
Private student loan interest rates are determined by each lender based on market factors and the borrower’s and co-signer’s creditworthiness. Most private lenders also offer a variable interest rate, which typically fluctuates monthly or quarterly with overnight lending rates, such as the Secured Overnight Financing Rate (SOFR).
What Are Current Student Loan Interest Rates?
Federal student loan rates for the year between July 1, 2024, to June 30, 2025, are:
- Direct subsidized and unsubsidized loans for undergraduates: 6.53%
- Direct unsubsidized loans for graduates or professional borrowers: 8.08%
- Direct PLUS loans for parents and graduate or professional students: 9.08%
The Bottom Line
Federal student loan rates are relatively low when compared to historic levels. If you need student loans to pay for a college education, learn what the interest rates are and how they work before applying. Always exhaust all your options for federal student loans first by using the Free Application for Federal Student Aid (FAFSA), then research the best private student loans to fill in any gaps. Whether you choose federal or private loans, only take out what you need and can afford to repay.
If you have student loans and need help paying them, you may want to consider a refinance—but know that this could cause you to lose any protections you receive from having federal loans. If refinancing is right for you, review all of the best student loan refinance companies, which offer competitive rates and can cater to unique debt situations.
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