Mario Cazombo

As fall tuition deadlines approach, families are making last-minute decisions on how to cover college costs — and for many, that means turning to private student loans. If you’re borrowing for the upcoming school year, it’s important to outline your expenses and compare lenders carefully. To help you make smart borrowing decisions, here’s Money’s guide to everything you need to know about student loan interest rates right now. Latest student loan interest rates Fixed rates Variable rates Private student loans 2.95% – 17.99% 4.13% – 17.99% Federal student loans 6.39% – 8.94% N/A Federal vs. private student loans Before you borrow for college, it’s important to understand how federal and private student loans differ. Federal student loans have fixed rates set annually by the government and everyone who borrows gets the same rate (based on the type of loan they’re taking out). Private student loan rates vary by lender and a borrower’s financial profile. In the sections below, you’ll find a breakdown of how each type of loan works — and a more in-depth snapshot of where rates stand today. Everything you need to know about student loan interest Whether you’re taking out your first loan to pay your tuition bill for the upcoming fall semester or you recently graduated and are getting ready to start repaying, understanding how interest accrues on your loans can help you avoid unpleasant surprises. Table of contents: Federal student loan interest rates Private student loans interest rates How to get a lower student loan interest rate Student loan interest and taxes Interest rates: student loans vs. other types of debt Federal student loan interest rates When students need to borrow money to pay for college, experts recommend starting with federal student loans since they typically have lower rates and better repayment options than private student loans. Your interest rate depends on the type of loan you qualify for and the year you took out the loan. Current interest rates on federal student loans On May 30, the Education Department’s Federal Student Aid office announced the new federal student loan interest rates for the 2025-2026 school year. The following rates apply to all loans disbursed between July 1, 2025 and June 30, 2026. Loan Name Borrower Type Interest Rates for 2025-2026 Interest Rates for 2024-2025 Direct Subsidized Undergraduate students 6.39% 6.54% Direct Unsubsidized Undergraduate students 6.39% 6.54% Direct Unsubsidized Graduate students 7.94% 8.08% PLUS Loan Graduate students and parents of undergraduate students 8.94% 9.08% How do interest rates work on federal student loans With federal student loans, the rates are fixed, meaning they stay the same for the duration of your repayment term. The process for setting rates was established by Congress: the rates are based on the high yield of the 10-year Treasury Notes at auction each May, so the rate can change every year for new borrowers. If you have federal subsidized loans, the government will cover the interest that accrues while you’re in college, during the six months after you graduate or leave school and during any periods of deferment. But with unsubsidized and PLUS loans, you are responsible for all the interest charges, even while you’re in school. Interest on unsubsidized federal loans is capitalized — or added to the loan principal — when your grace period ends, so it’s common to see your balance grow unless you make large enough payments that cover the accrued interest. Interest capitalization is costly because after the capitalized amount is added to your principal, interest then continues to be charged on the new, larger balance. Private student loan interest rates Private student loans can come from banks, credit unions and other financial institutions. Lenders can set their own rates, but they usually base them on a measure like the Secured Overnight Refinancing Rate (SOFR) — a benchmark that influences the rates at which banks lend to one another. Lenders will charge the SOFR rate plus a margin rate, such as 1%. As the SOFR rate changes, the lender will change its rates too. Current rates on private student loans Private student loan rates vary by lender, borrower credit profile and loan terms. These loans can have fixed or variable rates; fixed rates never change, while variable rates can fluctuate over time, depending on market conditions. Currently, fixed rates for private student loans start around 3.24%. Below are the latest private student loan interest rates from top lenders: Lender Fixed Interest Rates* Variable Interest Rates* Abe 2.95% to 15.61% 4.13% – 16.54% Ascent 2.98% – 14.93% 4.34% – 15.00% Citizens Bank 3.24% – 14.99% 4.99% – 15.47% College Ave 2.95% – 17.99% 4.24% – 17.99% Custom Choice 3.24% – 15.71% 4.19% – 16.39% Earnest 3.19% -16.49% 4.99% – 17.10% ELFI 2.99% – 14.22% 5.00% – 13.97% Massachusetts Educational Financing Authority (MEFA) 3.29% – 8.89% N/A Sallie Mae 2.99% – 17.49% 4.37% – 16.99% SoFi 3.23% – 15.99% 4.39% – 15.99% Rhode Island Student Loan Authority (RISLA) 2.99% – 8.39% N/A *Rates current as of Aug. 4, 2025. Lowest rates reflect a .25% discount for setting up autopay. How do interest rates work on private student loans? Private loan interest rates can vary significantly between lenders, and your rate is influenced by your credit history, income, desired loan term and the program you are enrolled in for the upcoming semester. With private student loans, payments are usually required while you’re in school, though you may be able to pay a reduced amount. Interest starts accruing immediately after loan disbursement. Private lenders will capitalize the interest at different points, but how capitalization is handled varies by lender. Keep in mind: Private loans can be a riskier form of debt than federal loans since they usually have higher rates and fewer repayment options. Exhaust your other financial aid options before turning to private loans. Current rates for student loan refinance When you refinance a student loan, you replace your existing student loan (whether it’s a federal loan or a private loan) with a new private loan. Therefore,