Federal Student Loan Interest Rate 2020-21

According to bellwether data released yesterday by the Treasury Department, interest rates on new federal student loans will decrease by nearly 40% during the upcoming academic year, despite the severe economic effects of the COVID-19 outbreak.

Since 2013, the 10-year Treasury note rate and a fixed percentage that varies by loan type have been used to determine the annual interest rates on federal student loans. g. , subsidized Stafford, unsubsidized Stafford, PLUS). On May 12, 2020, the U. S. Treasury’s 10-year Treasury note auction resulted in a yield of . 7 percent, a new low for interest rates on federal student loans and a drop of almost two percentage points from the previous year. For federal student loans disbursed between July 1, 2020, and June 30, 2021, the updated rates will be used, and they will remain fixed for the duration of the loan.

Below are the updated interest rates as well as a comparison of rates from the previous three academic years. Please be aware that due to CARES Act provisions that offer short-term financial relief to student borrowers, the interest rates on all federal student loans are currently frozen at zero until September 30, 2020.

Learn more about private student loans

Until 60 days after the Supreme Court rules on President Joe Biden’s student debt relief plan, or until June 30, 2023, whichever comes first, the interest rates on your federal student loans have been set to 0% if you have started repayment. No payment is due before then.

The federal student loan interest rate for undergraduates is 4 if you’re still taking out loans to pay for your education. 99% for the 2022-23 school year. Federal rates for parent loans and unsubsidized graduate student loans are higher — 6 54% and 7. 54%, respectively. On July 1st, the rates for the following year go into effect.

When compared to federal rates, private student loan interest rates can occasionally be lower, but approval for the lowest rates requires excellent credit. You might be able to refinance existing student loans to get a lower rate if you have good credit.

Current student loan interest rates

For the 2022–2023 academic year, interest rates on federal student loans will rise. This change will affect loans disbursed between July 1, 2022, and July 1, 2023. All new federal direct undergraduate student loans have a 4 percent interest rate. 99%, up from 3. 73% in 2021-22. Unsubsidized direct graduate student loan rates are 6. 54%, up from 5. 28%. The interest rate on PLUS loans for parents and graduate students is 7 percent. 54%, up from 6. 28%.

Fill out the Free Application for Federal Student Aid to apply for federal student loans, grants, and work-study programs. Unsubsidized student loans are typically available to all students, regardless of their financial need, and subsidized loans may be available to those who do. Because the government pays the interest that accumulates while you’re in school, subsidised loans are more advantageous.

You will receive slightly less money than you borrowed because the fees for federal student loans are calculated as a percentage of the total loan amount and deducted proportionally from each loan disbursement.

Academic year	Undergraduate	Graduate	Parent PLUS, Grad PLUS
2022-23	4.99% interest 1.06% fee	6.54% interest 1.06% fee	7.54% interest 4.23% fee
2021-22	3.73% interest 1.06% fee	5.28% interest 1.06% fee	6.28% interest 4.23% fee
2020-21	2.75% interest 1.06% fee	4.30% interest 1.06% fee	5.30% interest 4.24% fee
2019-20	4.53% interest 1.06% fee	6.08% interest 1.06% fee	7.08% interest 4.24% fee
2018-19	5.05% interest 1.06% fee	6.60% interest 1.06% fee	7.60% interest 4.25% fee
2017-18	4.45% interest 1.07% fee	6.00% interest 1.07% fee	7.00% interest 4.26% fee
2016-17	3.76% interest 1.07% fee	5.31% interest 1.07% fee	6.31% interest 4.28% fee
2015-16	4.29% interest 1.07% fee	5.84% interest 1.07% fee	6.84% interest 4.27% fee
2014-15	4.66% interest 1.07% fee	6.21% interest 1.07% fee	7.21% interest 4.29% fee

Source: U. S. Federal Student Aid Interest Rates, Department of Education, effective annually on July 1 Loan fees effective October 1 of each year.

Before taking out a private student loan, it’s typically best to use all of your federal student loan options. If you require one, shop around first to ensure that you receive the best possible rate. Applying with a co-signer who has good credit is an option if you don’t meet the lender’s credit requirements.

Current private student loan interest rates, updated monthly:

If you are comfortable giving up federal benefits like income-driven repayment and Public Service Loan Forgiveness and your credit score is at least in the high 600s, you can afford your debts and other expenses. Look around before refinancing to find the best rate you’re eligible for.

Current student loan refinancing rates, updated monthly:

Average student loan interest rate

The average student loan interest rate is 5. 8% of all households with student debt, according to a 2017 study by the nonprofit, apolitical think tank New America. That includes both federal and private student loans, with federal loans accounting for about 90% of all student debt.

With a 5. 8% interest rate over ten years would cost a borrower $9,600 in interest on a $30,000 student loan.

According to the report, some groups have higher average student loan interest rates than others. For instance, the average rate is 6. 3% of households with borrowers who did not finish their college degrees, and 6 6% among households with incomes less than $24,000.

If you consolidate your student loans through the federal government, the weighted average interest rate will apply if you have multiple loans with different interest rates. Your average interest rate won’t be lowered by federal consolidation, but it might be by refinancing with a private lender.

Student loan interest rate calculator

Whether a student loan is federal or private will affect how the interest rate is calculated. Every borrower who applies for a federal loan of the same type in a given year pays the same interest rate. Higher credit scores typically entitle borrowers to lower rates on private loans, while lower credit scores typically result in higher rates.

Federal student loans:

Congress sets interest rates yearly based on the 10-year Treasury note

Most have fees charged as a percentage of the total loan amount

Rates are fixed for the life of the loan

Private student loans:

Interest rates are typically credit-based

Most private lenders dont charge origination fees

Borrowers can choose either a fixed or variable interest rate

Variable rates are subject to change monthly or quarterly

Unless you have subsidized federal loans, student loan interest accrues while you are in school, so when you start repayment, you’ll owe more than you originally borrowed. You can save on interest by:

Paying off interest before your grace period ends. When your student loans enter repayment, the unpaid interest will be capitalized, or added to your principal balance. Avoid costly interest capitalization by making monthly interest-only payments or paying a fixed amount — say, $25 — while you’re in school. Alternatively, pay off the interest during your grace period using graduation money or income from your first post-college job.

Avoiding income-driven repayment, if possible. Federal income-driven repayment plans can keep cash-strapped borrowers out of default, but they also cost borrowers more interest in the long run. If you can afford to make federal loan payments on the standard, 10-year repayment plan, do it.

Watching your overall financial health. Although you’ll save the most in student loan interest by paying off the loan as soon as possible, other financial goals are higher priority. Before paying extra on student debt, build an emergency fund, contribute to a 401(k) or IRA, and pay off high-interest debt such as credit cards.

Key terms in this story

Anna Helhoski is a writer and an expert on student loans for NerdWallets. The Associated Press, The New York Times, The Washington Post, and USA Today have all published her articles. Read more.

FAQ

What is the current interest rate on federal student loans?

Currently, the interest rate on federal student loans for undergraduates is 4. 99 percent for the academic year 2022–2023, while graduate students pay 6 percent interest. 54 percent or 7. 54 percent for unsubsidized loans or Direct PLUS loans, respectively.

Is 7% interest high for student loans?

The official estimates for the average private student loan interest rate typically fall between the ranges of 6% and 7%. Among major private lenders, 12. 99% is the highest annual percentage rate (APR). The lowest available APR among private lenders is 1. 04% (including an auto-pay discount)*.

Are federal student loans still 0% interest?

For example, say your grace period ended April 15, 2022. Your payments would be stopped in this situation from April 15, 2022, until the end of the payment pause. During this time, the interest on your loans will remain at 0%. Interest on your loan builds up while you’re in school.

What was the student loan interest rate in 2020?

Current student loan interest ratesAcademic yearUndergraduateGraduate2020-212. 75% interest 1. 06% fee4. 30% interest 1. 06% fee2019-204. 53% interest 1. 06% fee6. 08% interest 1. 06% fee2018-195. 05% interest 1. 06% fee6. 60% interest 1. 06% fee2017-184. 45% interest 1. 07% fee6. 00% interest 1. 07% fee.