What Is Student Loan Interest?
Loans aren’t free. When you borrow money, you will not just pay back the amount you borrowed; lenders will also charge you interest.
The simplest way to think of it is interest is the cost you pay to borrow money. Whether you have federal student loans or private student loans you will be charged interest until that loan is paid in full. That means, when you are done paying off the loan, you will have repaid the original amount you borrowed (known as your original principal), plus a percentage on the amount you owe (interest).
In today’s marketplace, private student loan interest rates range from around 4.49% APR (annual percentage rate) up to 14.50% APR. Many private student loan lenders offer both fixed and variable interest rates, enabling eligible borrowers to choose the option they prefer. The interest rate you qualify for will be based on your creditworthiness you and that of your cosigner, if applicable. You can easily compare lender rates, terms, and benefits on our student loan lender comparison page.
Instantly Compare Private Student Loan Lenders
Interest is generally assessed by using a simple daily formula or a compounding interest formula. It’s important to understand the difference between these two formulas so you understand how your interest is calculated.
How Simple Interest Works
When you have a simple interest loan, also known as the simple daily interest formula, interest is calculated based on your outstanding principal balance. All federal student loans charge interest using this formula. Some private student loans will also use the simple daily interest formula, and you can confirm this in the terms and conditions of your loan.
How Compound Interest Works
A compound interest formula calculates the cost of your loan by applying your interest rate to your principal (the original amount you borrowed) as well as any outstanding or unpaid interest that has been adding up on your loan. In other words, the cost of your loan will be assessed on not only the original amount you borrowed, but any outstanding interest as well. You may have heard people refer to this as being charged “interest on interest.” This may be a method a private student loan may use to calculate your interest charges.
Fixed vs Variable Interest Rates
Another common source of confusion is the difference between fixed and variable interest rates. Both types of interest rates may be offered by private student loan lenders, so it’s important to understand the difference.
What Is a Fixed Interest Rate?
A fixed interest rate is a rate that stays the same for the life of the loan. If you borrow a loan at 5% interest, your interest rate will not change over the life of your loan. It will remain at 5%.
Federal student loans all have fixed interest rates. Private student loans will generally give you an option to choose a fixed or variable rate.
Pros and Cons of Fixed Interest Rates
| Pros | Cons |
|---|---|
| Lower-risk — monthly payments are stable | Rates are typically higher than variable rates |
| While a variable rate can increase, a fixed rate cannot | While a variable rate can decrease, a fixed rate cannot |
| If you have a strong credit history, you can qualify for a lower fixed rate | The lowest advertised fixed rate may not be available if your credit is not strong enough |
What Is a Variable Interest Rate?
Typically, a private student loan lender’s lowest advertised rate is a variable interest rate. A variable interest rate may change throughout the life of the loan, yielding a different loan payment every time the interest rate changes. The interest rate when the loan enters repayment may be much different than the interest rate when you first obtained the loan.
Also, variable interest rates are often expressed as the sum of a variable rate index and a fixed margin. The variable rate index is a reference rate that changes periodically, such as the LIBOR index, SOFR (Secured Overnight Financing Rate), the Prime Lending Rate or the interest rates on U.S. Treasuries.
For example, the lender might specify the interest rate as Prime + 5%. Some may misinterpret this as a 5% fixed interest rate, ignoring the variable-rate index part of the equation. If the Prime Lending Rate is 3.25%, then Prime + 5% yields an 8.25% interest rate. If the Prime Lending Rate were to increase to 6%, then Prime + 5% would yield an 11% interest rate. Variable interest rates typically change monthly, quarterly or annually.
It's important to note that when your interest rate changes your payments will go up or down accordingly. It’s important to be prepared for your payments to potentially increase should your interest rate rise. We always recommend that you estimate your monthly payments based on the low-end of your interest rate range, and the high-end. Both of these payments should be considered affordable to you. You can use our Loan Payment Calculator.
Pros and Cons of Variable Interest Rates
| Pros | Cons |
|---|---|
| Rates are typically lower than fixed rates | Higher risk — monthly payments can fluctuate |
| If the interest rate decreases, you pay less | If the interest rate increases, you have to pay more |
| Those with strong credit may qualify for a lower variable rate | The lowest advertised variable rate may not be available if your credit is not strong enough |
How Is Student Loan Interest Calculated?
Let’s go over how student loan interest is calculated, and let’s explain the cost of your loan.
As a reminder, the U.S. Department of Education (ED) offers federal student loans that can be subsidized or unsubsidized. For both types of loans, the simple daily interest formula is used to calculate how much interest you will be charged. Direct Stafford loans, which can either be subsidized or unsubsidized loans have fixed, low interest rates.
Since private student loans come from private lenders, each private loan will have its own terms and conditions. While a private lender may use the simple daily interest formula, they may use a compound interest formula to determine the daily cost of your loan.
Simple Interest Formula
Say you have an unsubsidized student loan with an outstanding balance of $10,000 and a fixed interest of 5%. To determine your daily cost, you would multiply your outstanding principal balance by your interest rate and divide it by 365.
Multiple $10,000 by 0.05 (5%) and divide by 365.
$10,000 X 0.05/365 = 1.370
The daily cost of your loan is $1.37.
This chart shows what the accrued interest over 28 days would be on a $10,000 loan balance with a 5% interest rate.
| Outstanding Principal Balance | Annual Interest Rate | Number of Days | Interest Accrued |
|---|---|---|---|
| $10,000 | 5.00% | 7 | $9.59 |
| $10,000 | 5.00% | 14 | $19.18 |
| $10,000 | 5.00% | 21 | $28.77 |
| $10,000 | 5.00% | 28 | $38.36 |
You can start to see how expensive your loan will get over time. Now let’s take this a step further. Let’s look at the cost of your loan over a few years.
This example is showing the cost if you have made zero payments, and interest has not been capitalized to your outstanding principal balance.
| Outstanding Principal Balance | Annual Interest Rate | Number of Days | Interest Accrued |
|---|---|---|---|
| $10,000 | 5.00% | 365 (1 year) | $500.05 |
| $10,000 |
5.00% |
730 (2 years) | $1000.10 |
| $10,000 |
5.00% |
1095 (3 years) | $1500.15 |
| $10,000 |
5.00% |
1460 (4 years) | $2000.20 |
Compound Interest Formula
Remember that federal student loans use the simple daily interest formula. But you may encounter a private student loan which uses a compound interest formula; however, some will still use a simple daily interest formula. To compare the difference in how the interest is applied, take a $25,000 loan and an interest rate of 5.00%.
With simple interest, the $25,000 loan accrues $3.43 in interest per day. This is because the principal balance is not changing during this time.
On the other hand, with compound interest the $25,000 loan with the same interest rate would accrue $3.43 the first day, but then new accrued interest of $3.43 would be added to the principal balance to determine the interest for the second day. This process continues throughout the month, leading to you pay more in interest per day because the principal balance is rising every day that a payment isn’t made.
What is Capitalized Interest?
Capitalized interest is unpaid interest that gets added to your outstanding principal balance. Once the interest on a loan is capitalized, you will then have to pay interest on the interest. This is important to understand because your outstanding principal balance could increase if outstanding interest is added to it.
Student Loan Interest Capitalization
In the federal student loan program, there are specific interest capitalizing events, like the change of a repayment status (e.g., entering repayment after your grace period). When it comes to private student loans, it’s important to read the terms and conditions to understand when your lender will or can capitalize any outstanding interest onto your principal balance.
When Do Student Loans Start Accruing Interest?
Student loans, and most loans in general, begin to accrue interest as soon as they are disbursed. For student loans, the bigger question is who is paying the interest and at what time? Who pays the interest on your student loan will vary depending on the type of loan(s) you have.
Federal Subsidized Loans
Federal subsidized loans are need-based loans that are only available to undergraduate students. If you have a subsidized loan, there are certain periods of time—like when you are in-school at least half-time, during your grace period, and authorized periods of deferment—when the federal government pays the interest on the loan. Outside of those approved periods, it’s your responsibility to pay back the accrued interest.
Federal Unsubsidized Loans and Private Student Loans
Undergraduate, graduate, and professional students may be offered Direct Stafford Unsubsidized Loans. Unsubsidized loans may also come in the form of Direct PLUS Loans which can be offered to parents of dependent undergraduate students, as well as graduate or professional students (Grad PLUS Loans). And when it comes to private student loans, these can be borrowed by students and parents. Federal unsubsidized loans and private student loans do not include an interest subsidy, which means you are responsible for the interest as soon as the loan is disbursed.
How Are Student Loan Payments Applied?
When you make a payment on your student loans, your lender or servicer will apply your payment in a certain order. Your monthly payments will be applied to any outstanding interest first, and any amount left over will be applied to your principal balance. This is always the order of things.
You may have heard of techniques to pay down your debt fast, and many of them involve paying more than your minimum monthly payment in order to have those payments applied to your outstanding principal balance.
When you make an overpayment (i.e. pay more than your monthly payment amount), you will need to let your servicer know how to handle the payment. If you have multiple loans and want the extra payment to be applied to a particular loan, you will need to spell this out in your instructions. Also, if you want the extra amount to go to your principal balance without advancing your due date, say so. If you do not specify this, your servicer may just advance your payment due date automatically—basically that means that your overpayment will go towards to your next payment due.
It’s important to understand that your servicer cannot apply extra payments to reduce your principal balance if your account is past due and the payment needs to cover any outstanding interest. This can be a point of confusion. If you’re trying to pay off loan A faster, but loan B has outstanding interest, your servicer may not be able to fulfill your request to apply extra payments to your principal balance on loan A until all of the outstanding interest on loan B is satisfied.
Now how do you use this knowledge to your benefit while you’re in school? Since your student loan will likely be using a simple daily interest method to calculate your daily cost, your goal should be to pay down the interest while you’re in school to avoid a larger outstanding principal balance when you enter repayment (because of capitalization). BONUS: if you only have subsidized loans, you can make interest-free payments while you’re in school and during your grace period. This is because the government is paying the interest on your behalf. So, each payment you make will go directly to your principal balance.
Interest Rates for Federal Student Loans
Federal student loans have a fixed interest rate—meaning the interest rate stays the same for the entire life of the loan—and they apply that rate using the simple daily interest formula.
Federal Student Loan Interest Rate 2022 - 2023
The following lists current federal student loan rates for comparison. These rates are fixed for all borrowers and are valid from July 1, 2022 to June 30, 2023.
| Undergraduate Subsidized or Unsubsidized | Graduate Subsidized | PLUS Loans |
|---|---|---|
| 4.99% | 6.54% | 7.54% |
Interest Rates for Private Student Loans
Private loans can have either a variable interest rate (meaning it may fluctuate with market changes) or a fixed interest rate (meaning it will stay the same over the life of the loan).
NOTE: If you have a private loan, or are researching private loans, you will encounter a wide range of interest rates. This is why it’s important to research more than one lender to determine the interest rates and repayment terms that work for you. Also note that lenders typically impose a cap—or ceiling—on variable interest rates which provides an assurance that your rate will not exceed the established, maximum rate. But this will vary by lender.
Regardless of whether you take out a federal student loan or a private student loan, and whether your interest accrues (keeps growing) with the simple daily interest formula or the compound interest formula, you will be charged interest every day.
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- Competitive fixed and variable APRs starting at 4.74%1
- Multiple repayment options including: full principal and interest, interest-only, deferred, and flat payment
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- Coverage up to 100% of your school-certified cost of attendance ($1,000 minimum)3
- No origination, application and processing fees, no fees for early repayment
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College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
2This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
3As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 03/01/2023. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
- Variable Rates: 5.49% APR - 15.83% APR. Fixed Rates: 4.50% APR - 14.83% APR. Lowest rates shown include 0.25% interest rate discount with auto debit payments.1
- Apply online in minutes and receive an instant credit result2
- Multiple repayment options from in-school payments to deferred.1 No origination fee or prepayment penalty3
- Last year, students were 4x more likely to be approved with a cosigner4 and it may help you get a better rate.
- Borrow up to 100% of school-certified expenses, whether you're online or on campus5
Borrow Responsibly
We encourage students and families to start with savings, grants, scholarships, and federal student loans to pay for college. Students and families should evaluate all anticipated monthly loan payments, and how much the student expects to earn in the future, before considering a private student loan.
Loans for Undergraduate & Career Training Students are not intended for graduate students and are subject to credit approval, identity verification, signed loan documents, and school certification. Student must attend a participating school. Student or cosigner must meet the age of majority in their state of residence. Students who are not U.S. citizens or U.S. permanent residents must reside in the U.S., attend school in the U.S., apply with a creditworthy cosigner (who must be a U.S. citizen or U.S. permanent resident), and provide an unexpired government-issued photo ID. Requested loan amount must be at least $1,000.
1Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment.
2In 2021, instant credit decisions were provided to 97% of applicants. Other applications typically received credit decisions in 3 to 5 business days.
3Although we do not charge a penalty or fee if you prepay your loan, any prepayment will be applied as outlined in your promissory note-first to Unpaid Fees and costs, then to Unpaid Interest, and then to Current Principal.
4Based on a comparison of approval rates for Sallie Mae Smart Option Student Loans for Undergraduate Students who applied with a cosigner versus without a cosigner during a rolling 12-month period from October 1, 2020 through September 30, 2021.5 For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website may be subjected to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time.
6 Examples of typical costs for a $10,000 Smart Option Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment may receive a loan term that is less than 10 years.
Information advertised valid as of 02/27/2023
SALLIE MAE RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS, SERVICES, AND BENEFITS AT ANY TIME WITHOUT NOTICE. CHECK SALLIEMAE.COM FOR THE MOST UP-TO-DATE PRODUCT INFORMATION.
Smart Option Student Loans® are made by Sallie Mae Bank. Sallie Mae, the Sallie Mae logo, and other Sallie Mae names and logos are service marks or registered service marks of Sallie Mae Bank. All other names and logos used are the trademarks or service marks of their respective owners.
Edvisors is not the creditor for these loans and is compensated by Sallie Mae for the referral of Sallie Mae loan customers.
© 2023 Sallie Mae Bank. All rights reserved. SLM Corporation and its subsidiaries, including Sallie Mae Bank are not sponsored by or agencies of the United States of America.
15-Year (undergraduate) repayment term; 20-Year (graduate) repayment term
- Fixed rates: 5.49% APR - 15.99% APR*; variable rates: 5.87% APR - 16.72% APR*
- Borrow up to 100% of school-certified costs, including tuition, housing, books and more. Aggregate loan limits apply.
- Choice of fixed or variable interest rate.
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- Got good grades? Get paid. You can qualify for a one-time cash reward on each new Discover student loan if you get at least a 3.0 GPA (or equivalent) in college or graduate school.**
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Discover® Disclaimers
*APR ranges vary by loan type and the lowest available APR may be higher than what is shown here. Lowest APRs are available to the most creditworthy applicants, and include an interest-only repayment discount and Auto Debit Reward. Applying with a creditworthy cosigner may improve your likelihood for loan approval and you may receive a lower interest rate.
The fixed interest rate is set at the time of application and does not change during the life of the loan unless you are no longer eligible for one or more discounts. The variable interest rate and corresponding APR may increase over the life of the loan. The variable interest rate is calculated based on the 3-Month CME Term SOFR index plus the applicable margin percentage less any applicable discounts. The 3-Month CME Term SOFR index value for variable interest rate loans is 4.625% as of January 1, 2023. 3-Month CME Term SOFR is administered by CME Group and is published by CME Group on its website (cmegroup.com/termsofr). Discover Student Loans may adjust the variable interest rate quarterly on each January 1, April 1, July 1 and October 1 (each an “interest rate change date”), based on the 3-Month CME Term SOFR rate available for the day that is 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125), or 0%, whichever is greater. This may cause the monthly payments to increase, the number of payments to increase or both. If the 3-Month CME Term SOFR rate is less than zero percent, then the index will be deemed to be zero percent (as stated in the promissory note) for purposes of calculating your interest rate. Your variable interest rate (index + margin - applicable discounts) will not exceed 18%. Our lowest APRs are only available to applicants with the best credit. The APR will be determined after an application is submitted. It will be based on credit history, the selected repayment option and other factors, including a cosigner’s credit history (if applicable). If a student does not have an established credit history, the student may find it difficult to qualify for a private student loan on their own or receive the lowest advertised rate. Learn more about Discover Student Loans interest rates.
**Students who get at least a 3.0 GPA (or equivalent) may qualify for a one-time cash reward of 1% of the loan amount on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Visit DiscoverStudentLoans.com/Reward for reward and redemption terms and conditions.
***Visit DiscoverStudentLoans.com/AutoDebitReward for terms and conditions.
- AFFORDABLE variable rates starting at 5.86% APR with Automatic Debit Discount*
- 1% CASH BACK Graduation Reward*
- NON-COSIGNED option may be available for undergraduate juniors and seniors.
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* Ascent's undergraduate and graduate student loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs
Rates are effective as of 3/01/2023 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: www.AscentFunding.com/Rates
1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs require interest-only payments, the shortest loan term, and a cosigner, and are only available to our most creditworthy applicants and cosigners with the highest average credit scores.
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- 9-month grace period (3 months more than most lenders)2
This information is for graduate and undergraduate students attending participating degree-granting schools. Borrowers must be U.S. citizens or U.S. permanent residents if the school is located outside of the United States. Non-U.S. citizen borrowers who reside in the U.S. are eligible with a creditworthy cosigner (who must be a U.S. citizen or U.S. permanent resident) and are required to provide an unexpired government-issued photo ID to verify identity. Applications are subject to a requested minimum loan amount of $1,000. Current credit and other eligibility criteria apply.
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.70% APR to 14.85% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.24% APR to 14.65% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan origination loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
1You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
2Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.
3Earnest does not charge fees for origination, late payments, or prepayments. Florida Stamp Tax: For Florida
residents, Florida documentary stamp tax is required by law, calculated as $0.35 for each $100 (or portion thereof) of the principal loan amount, the amount of which is provided in the Final Disclosure. Lender will add the stamp tax to the principal loan amount. The full amount will be paid directly to the Florida Department of Revenue. Certificate of Registration No. 78-8016373916-1.
4Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.
The information provided on this page is updated as of 03/08/2023. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information.
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Up to four repayment types (including no payments while in school) and multiple repayment terms help you find the loan that fits your budget
- Variable Rates: Starting variable rates range from 4.99% APR - 13.13% APR (with autopay)*, and will never exceed 13.95% (sometimes lower in certain states as required by law)
- Fixed Rates: Fixed rates range from 4.49% APR to 13.98% APR (with autopay)*
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*UNDERGRADUATE LOANS: Fixed rates from 4.49% to 13.98% annual percentage rate ("APR") (with autopay), variable rates from 4.99% to 13.13% APR (with autopay). GRADUATE LOANS: Fixed rates from 5.25% to 13.60% APR (with autopay), variable rates from 5.49% to 13.07% APR (with autopay). PARENT LOANS: Fixed rates from 6.50% to 13.98% APR (with autopay), variable rates from 6.32% to 13.13% APR (with autopay). For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 01/30/2023.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, years of professional experience, income, and a variety of other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Financial Protection and Innovation under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
Making Payments on Student Loan Interest While In School
Paying your student loans while in school is a great tactic to save money on interest paid over the life of the loan. In fact, some private student loan lenders provide lower interest rates to borrowers who agree to repay the interest on their loans while they are enrolled in school. Choosing not to make interest payments while in school may permit your lender to capitalize your interest, or add the accrued interest to the principal balance of your loan once you enter repayment. Making interest-only payments may prevent this from happening and ensure that your loan principal balance isn’t larger than what you originally borrowed.
How to Lower My Interest Rate on Federal Student Loans
To lower your interest rate on federal student loans, you basically need to refinance them with a private lender. In the federal student loan program, you are pretty much locked in with your fixed rate. However, if you choose to enroll your monthly payments in auto-debit, you could qualify for a 0.25% interest rate reduction.
The federal student loan program does have an option to consolidate your student loans, however federal consolidation does not necessarily change your interest rate much. If you choose to combine your loans with a Direct Consolidation Loan, your interest rate will be based on the weighted average of the loans you combined, rounded up to the nearest 1/8th of a percent.
If you would like to lower your interest rate on a federal student loan, you may want to consider refinancing with a private student loan lender.
Best Student Loan Refinance Lenders
College Ave Student Loans
- Variable rate range: 5.99% – 11.99% APR1
- Fixed rate range: 5.99% – 11.99% APR1
- No application or prepayment fees
- Apply in 3 minutes or less for instant credit decision
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2This informational repayment example uses typical loan terms for a refi borrower who selects the Full Principal & Interest Repayment Option with a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
3$5,000 is the minimum requirement to refinance. The maximum loan amount is $250,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.
Information advertised valid as of 03/01/2023. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
ELFI Student Loan Refinance
- Customers are saving an average of $309 every month and an average of $20,936 in total savings after refinancing their student loans with Education Loan Finance1
- Variable and fixed rates starting from 4.53% APR and 5.08% APR2
- Prequalify in as little as two minutes
- Award winning customer service from your dedicated Student Loan Advisor who is matched to you from the moment you sign up
1Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.
2Rates accurate as of 3/15/23. The interest rate and monthly payment for variable rate loans may increase after closing. Your actual interest rate 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. For example, a 10 year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. To qualify for refinancing or student loan consolidation through Education Loan Finance, you must have at least $10,000 in qualified student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary Education Loan Finance institution. Education Loan Finance Parent Loans are limited to a maximum of the 10-year term.
SoFi Student Loans
- Rates as low as 5.09% variable and 4.49% fixed1
- No fees or prepayment penalties
- Unemployment protection
1Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
Splash Financial Refinance Loan
- Rates as low as 4.59%1 Variable APR and 4.47%1 Fixed APR
- No pre-payment penalties, origination, or application fees
- See rates in 3 minutes without affecting your credit score2
1The rates displayed may include a 0.25% autopay discount.
2To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Earnest Student Loan Refinancing
- Variable rates starting at 4.99% APR (including 0.25% Auto Pay discount)*
- Fixed rates starting at 4.96% APR (including 0.25% Auto Pay discount)*
- Choose your own monthly payment
- No fees of any kind and exceptional customer service for the life of your loan
- Check your rate in under 2 minutes
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 5.21% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.24% APR to 9.19% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.
*Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance. Not all borrowers will qualify for our lowest rates, and your rate will be based on creditworthiness at time of application.
The information provided on this page is updated as of 03/09/2023. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
THIS IS AN ADVERTISEMENT. YOU ARE NOT REQUIRED TO MAKE ANY PAYMENT OR TAKE ANY OTHER ACTION IN RESPONSE TO THIS OFFER.
How to Get a Lower Interest Rate on Private Student Loans
- Apply with a cosigner who has a very good credit score and strong credit history
- Take advantage of any interest rate discounts (such as 0.25% reduction for signing up for automatic debit) offered by your lender.
- Consider private student loan refinancing after you start repaying your loans. If your credit or your cosigner's credit has improved, you may qualify for a lower interest rate.
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Best Private Student Loans for March 2023
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