April 22, 2024 update: Student loan interest rates

Federal student loan interest rates — 5.50% for undergraduate students and 7.05% to 8.05% for graduate students and parents — are static for the 2023-2024 academic year.

However, private student loan rates remain on the move. Rates for new borrowers (in-school loans) and current borrowers (refinancing) headed in opposite directions this week.

Methodology

The student loan interest rates listed above are averages among borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender between the start and end dates of the most recent week.

Private student loan interest rates in April 2024

Unlike federal loans (their interest rates are below), private loans are credit-dependent: The better your credit, the lower your quoted rate. The vast majority of private student loans for undergraduate students are cosigned, meaning that a creditworthy parent or other relative joins the loan application to help their student qualify or unlock a lower interest rate. (Cosigning is a big responsibility since it includes the obligation to make payments if the primary borrower doesn’t.)

Note that the best private student loans typically require credit scores in the mid-600s. Below are the average student loan rates for various credit profiles as of April 22, 2024.

Student loan interest rates for refinancing in April 2024

The best student loan refinancing lenders offer fixed and variable interest rates, though (as with other loans) it’s wise to compare APRs when shopping around. APRs account for both the simple interest rate and any lender fees. Lenders may also advertise APRs that include discounts, such as 0.25 percentage points off for enrolling in automatic payments. (Although private lenders typically allow you to refinance federal loans, think twice before doing so, as it will irreversibly strip your federal loans of their government-exclusive protections.)

Today’s average student loan refinancing rate for 5-year variable terms is 5.88%, and the average for 10-year fixed terms is 7.40%. Here’s how rates for these terms adjust by credit band:

Current federal student loan interest rates

Federal student loan interest rates can change from year to year, so it’s important to keep an eye on rates as you move through your degree or program. They also differ based on the borrower and loan type. Here’s a quick breakdown of current rates and fees on federal loans:

What causes private student loan rates to fluctuate?

Private student loans are made by individual lenders, each of which has a formula for determining interest rates. Many factors impact the rates lenders set, including:

• The supply and demand of credit: When demand is higher, rates increase. When demand is lower, rates decrease.
• The lender’s cost of raising capital: The more expensive it is for lenders to access money, the higher student loan rates will be. When the Federal Reserve raises the federal funds rate, the costs of capital typically increase.
• The costs of servicing the loan: This is the amount it costs a lender to collect payments and provide customer support to borrowers.
• The lender’s profit margins: This is the return that the lender earns.

Borrower financial credentials also affect private student loan rates, including your credit scores and income. And you may choose a fixed or variable rate: With fixed-rate loans, the rate never changes. With variable-rate loans, rates start lower but can fluctuate over time depending on the financial index — often the Secured Overnight Financing Rate (SOFR) — to which they’re tied.

Will student loan interest rates decline?

No one can predict with certainty whether interest rates on future loans will be higher or lower than the rates currently offered. With that said, here’s what could cause federal and private loan rates to drop:

• Federal loans: If 10-year Treasury yields are lower in the last auction before June 1, 2024, than in the 2023 auction, rates will decrease for loans disbursed after July 1, 2024.
• Private loans: If market conditions change favorably and the cost of capital declines, the demand for credit declines or the supply of credit increases, rates may drop.

Did you know? Treasury yields and market conditions are impacted by economic predictions made by investors, indicators such as employment and inflation data, and Fed policymaking.

At its Jan. 31, 2024, meeting, the Federal Reserve declined to modify its current target interest rate and indicated it would not be appropriate to reduce rates until it’s more confident that inflation will “move sustainably toward” 2%. If the Federal Reserve doesn’t reduce interest rates, this reduces the chances of student loan rates declining in the near term.

How to get the best possible student loan rate

• Exhaust federal student loans first. Federal loans typically offer more affordable fixed rates, and rates aren’t impacted by your credit or income. Federal loans can also come with deferred interest (in the case of direct subsidized loans) and offer generous borrower benefits, including loan forgiveness options.
• Shop around. If you must take out private loans, remember that lenders set unique rates. Get quotes from several lenders — and prioritize those that offer pre-qualification — to make sure you’re being offered the best possible terms.
• Apply with a cosigner. Applying with a creditworthy cosigner increases your odds of securing a better rate. Parents or relatives with good credit and more substantial incomes can often serve as cosigners.
• Understand loan terms. Variable-rate loans may start with lower rates but can be riskier because rates can rise over time.
• Use a student loan payment calculator. Comparing different loans is easier with a free calculator (such as Calculator.net’s). Focus on total cost and monthly payments, as loans with longer repayment timelines have lower monthly payments but cost more in interest over time.

Alternatives to student loans

Borrowing should be a last resort, as loans have to be repaid with interest. Other options to pay for school include the following:

• Savings: Parents and adult relatives can save for college in tax-advantaged accounts, such as 529 plans. If you’re wondering how much to sock away, try your hand at a college savings calculator.
• Scholarships and grants: These don’t have to be repaid and can be offered by schools, state or federal governments or private organizations. Your school’s financial aid office can be a good resource to find scholarships and other gift aid opportunities.
• Work-study: Students may be eligible for the federal work-study program, which allows them to obtain a job on or off campus to earn money toward their costs. Federal work-study placements are assigned based on FAFSA information.
• Tuition payment plans: Some schools allow payments to be made over time rather than all at once. This can make it easier for students working their way through school to cover costs without borrowing.

Employer tuition assistance: Some employers provide financial aid assistance — including tuition reimbursement — for workers earning a degree.

Frequently asked questions (FAQs)

Melanie Lockert and Devon Delfino contributed to this article

Fact checked additionally by Emily McNutt