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Home Student Loans Private Student Loans Student Loan APR: Calculating the Real Costs
  • Contents
  • How Much Do Student Loans Cost?
  • How Does Interest Differ from APR (an Example)
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Student Loan APR: Calculating the Real Costs

Photo of Elaine Rubin
By Elaine Rubin
Updated on May 23, 2022
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The terms interest rates and APR (Annual Percentage Rate) are often used interchangeable.  However, they are in fact different.  Interest rate refers to the cost of a loan to a borrower expressed as a percent, while APR is the annual cost of a loan (including fees) also expressed as a percent.  APR can be higher than the interest rate when fees are involved.

How Much Do Student Loans Cost?

In its simplest terms a student will cost you want you borrow plus interest.  The interest is the money the lender gets for loaning you the money. Lender will essentially charge you interest based on either a simple daily interest formula or compound interest formula.     For the most part, student loan lenders (both federal and private) will utilize the simple daily interest calculation. Your daily interest is calculated based on your outstanding principal balance. As you pay your loan, and pay down your outstanding principal balance, the amount you are charged will decrease. Because of this, most of the interest on a loan is paid early on as the outstanding balance is the greatest.  Some might assume that the total cost of a student loan is the amount you borrowed plus the amount of interest you are charged over the life of the loan.

However, it’s not always so.  Federal student loans for example have origination fees, which are not assessed the same way as other fees on other types of debt. These fees are added to the loan balance up front, making the amount you borrow equal to the amount you agreed to borrow plus the origination fee.  Meaning, if you borrow $10,000 in a Direct PLUS loan which has a 4% origination fee, your school will only get $9,600 and $400 will be assessed as the origination fee, once the loan is completely disbursed.    Private student loans typically do not have fees associated with them, making the amount you agree to borrow, just that and nothing more. 

Compare Featured Lenders

College Ave Student Loans

Recommendation
Best for Private Loans
Interest Rates

Variable rates as low as: 1.29% APR1

Fixed rates as low as: 3.22% APR1

Repayment Terms

5, 8, 10 or 15 years2

Apply Now More Info
College Ave Student Loans
  • Competitive fixed and variable APRs starting at 1.29%1
  • Multiple repayment options including: full principal and interest, interest-only, deferred, and flat payment
  • Flexible payment terms ranging from 5, 8, 10, and 15 years2
  • 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
  • Apply online in 3 minutes and get an 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.

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 8/11/2022. 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.

Cosigner Recommended

Sallie Mae Private Student Loans

Recommendation
Best for Private Loans
Interest Rates

Variable Rates: 2.62% APR - 12.97% APR1

Fixed Rates: 3.75% APR - 13.72% APR1

Repayment Terms

N/A

Apply Now More Info
Sallie Mae Private Student Loans
  • Variable Rates: 2.62% APR - 12.97% APR. Fixed Rates: 3.75% APR - 13.72% 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
  • You may be 4X more like to be approved with a cosigner4 and it may help you get a better rate.
  • Only undergraduate student loan that offers 4 months of free Chegg® study help5
  • Borrow up to 100% of school-certified expenses, whether you're online or on campus6

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.

Sallie Mae loans are subject to credit approval, identity verification, signed loan documents, and school certification. This loan is available to students at participating schools and is not intended for students pursuing a graduate degree. 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.

1Interest 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. Payments may be required during the grace/separation period depending on the repayment option selected. Variable rates may increase over the life of the loan. Advertised variable rates reflect the starting range of rates and may vary outside of that range over the life of the loan. Advertised APRs assume a $10,000 loan to a borrower who attends school for 4 years and has no prior Sallie Mae loans. The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit 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.

2From January 1, 2021 to December 31, 2021, instant credit decisions were provided to 98% of applicants. Other applications 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 from May 1, 2020 through April 30, 2021.

5This promotional benefit is provided at no cost to borrowers with undergraduate or graduate loans with a first disbursement between May 1, 2021 and April 30, 2024. Borrowers who reside in, attend school in, or borrow for a student attending school in Maine are not eligible for this benefit. Chegg Study® offers expert Q&A where students can submit up to 20 questions per month. No cash value. Terms and Conditions apply. Please visit http://www.chegg.com/legal/smtermsandconditions for complete details. This offer expires one year after issuance.

6Loan amount cannot exceed the cost of attendance less financial aid received as certified by the school. Sallie Mae reserves the right to approve a lower loan amount than the school-certified amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half time.

Information advertised valid as of 7/25/2022

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.

© 2022 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.

Sallie Mae Private Student Loans

Recommendation
Best for Private Loans
Interest Rates

Variable: 1.86% APR – 11.52% APR1

Fixed: 3.20% APR – 11.99% APR1

Repayment Terms

5 , 7 , 10 and 15 years

Apply Now More Info
Sallie Mae Private Student Loans
  • Prequalification: Prequalify to estimate your rate without affecting your credit score
  • Online Application Process: Submit online application in minutes
  • Flexible Repayment Options: ELFI offers immediate, interest only, partial payment, and fully deferred repayment options
  • No Fees: No application fees, origination fees, or prepayment penalties
  • Low Rates: Fixed rates from 3.20% to 11.99% and variable rates from 1.86% - 11.52%
  • Award winning Customer Service: Individually paired Student Loan Advisor to guide you through the application process

*Education Loan Finance is a nationwide student loan provider offered by Tennessee based SouthEast Bank. ELFI is designed to assist students financially with receiving their education. Subject to credit approval. See Terms & Conditions. Interest rates current as of 07-01-2022. Variable interest rates may increase after closing but will never exceed 18.00%. Interest rates may also differ from the rates shown above. The term of your loan, financial history, and other factors, including your cosigner’s (if any) financial history can affect the interest rate. For example, a 10-year loan with a fixed rate of 7% would have 120 payments of $11.61 per $1,000 borrowed. Rates are subject to change.

 

Nelnet Student Loans

Recommendation
Best for Private Loans
Interest Rates

Variable: 2.34% APR (with auto debit discount) to 12.02% APR (without auto debit discount)1

 

Fixed: 3.49% APR (with auto debit discount) to 11.68% APR (without auto debit discount)1

 

Lowest rates listed above include an interest rate reduction for eligible applications, enrollment in auto debit, and are available only to the most creditworthy applicants. Advertised variable rates reflect the starting range of rates and may increase over the life of the loan. [See Disclaimer]

Repayment Terms

Multiple Term Options Available

Apply Now More Info
Nelnet Student Loans
  • Variable: 2.34% - 12.02% APR (with auto debit discount) Fixed: 3.49% - 11.68% APR (with auto debit discount)1
  • Multiple Loan Terms
  • Auto Debit Savings2
  • Easy Cosigning and Cosigner Release3
  • Flexible Repayment Options
  • No Origination Fees
  • Member FDIC

Lowest rates listed above include an interest rate reduction for eligible applications, enrollment in auto debit, and are available only to the most creditworthy applicants. Advertised variable rates reflect the starting range of rates and may increase over the life of the loan. [See Disclaimer]

1Fixed interest rates range from 3.49% APR (with auto debit discount) to 11.68% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s)

Variable interest rates range from 2.34% APR (with auto debit discount) to 12.02% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. Variable rates may increase after consummation. Variable rates for Nelnet Bank Student Loans are calculated as the One-Month SOFR plus the applicable Margin percentage. Variable rates will be based on the highest One-Month SOFR as published by the Federal Reserve Bank of New York on the twenty-fifth day (or the next business day) of the immediately preceding calendar month. The variable rate may change on the first day of each month if the SOFR index changes. This may result in higher monthly payments. The current One-Month SOFR index is 2.29% as of August 1, 2022.

The lowest interest rate for each loan type requires automatically withdrawn (“auto debit”) payments. The lowest rate is available only to the most creditworthy applicants. Not all borrowers will receive the lowest rate., The interest rate and Annual Percentage Rate (APR) may be higher depending upon (1) the credit history of the borrower and, if applicable, the cosigner, (2) the repayment option and loan term selected, and (3) the loan type selected. If approved, applicants will be notified of the rate qualified for within the stated range.

2Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is cancelled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.

3A request for the cosigner to be released can be made by either the borrower or cosigner when each of the following conditions has been met:

  • The account must have been in full principal and interest repayment for at least 24 months.
  • Twenty-four consecutive, on-time principal and interest payments, or lump sum equivalent, must have been made.
  • NOTE: A lump sum payment does not replace the requirement to have been in full principal and interest repayment for at least 24 months. Interest-only or fixed-pay payments while enrolled in school do not qualify towards the 24 consecutive on-time payments.
  • The loan must be current at the time of request.
  • The loan must not have been in deferment, hardship forbearance, or other alternative payment assistance plan within the past 24 months.
  • The loan must not have been permanently modified from its original terms in the credit agreement.
  • The primary borrower must be a U.S. citizen or have permanent residency in the United States.
  • The primary borrower must meet the age of majority requirement in their permanent state of residency.
  • Requirements are subject to change.

If all of these conditions have been met, then an application for cosigner release may be submitted. The primary borrower is required to demonstrate they have the ability to assume sole responsibility for the loan(s) by providing proof of income, meeting debt-to-income requirements, and having a satisfactory credit history. (A credit report will be obtained during the review process).

If you have questions on cosigner release, or would like to apply, contact us via email or phone at [email protected] or 800.446.4190.

 

Ascent offers loans that power bright futures

Recommendation
Best for Private Loans
Interest Rates

Variable rates as low as: 1.75% APR1

Fixed rates as low as: 3.22% APR1

Repayment Terms

5, 7, 10, 12 and 15 years

Apply Now More Info
Ascent offers loans that power bright futures
  • AFFORDABLE variable rates starting at 1.75% APR with Automatic Debit Discount*
  • 1% CASH BACK Graduation Reward*
  • NON-COSIGNED option may be available for undergraduate juniors and seniors.
  • PAY AFTER LEAVING SCHOOL – Customize your loan with flexible repayment options – start payments after graduation.
  • FORGET FEES – No application, origination or disbursement fees. No prepayment penalty if you choose to pay your loan off early.
  • COVER UP TO 100% of your tuition and eligible living expenses.

* Ascent 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 08/01/2022 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. Click here for details. Cosigned Credit-Based Loan student borrowers 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 are available for the most creditworthy applicants and may require a cosigner.

Earnest Private Student Loan

Recommendation
Best for Private Loans
Interest Rates

Graduate Rates

Fixed:3.22%-10.99% APR1

Variable:1.34%-9.89%APR1 

Undergraduate Rates

Fixed:3.22%-12.,78%APR1

Variable:1.34%-11.44%APR1 

Repayment Terms

5, 7, 10,15 or 20 years

Apply Now More Info
Earnest Private Student Loan
  • Check your eligibility in just 2 minutes
  • Flexible repayment options you can choose from
  • No fees for origination, disbursement, prepayment, or late payment3
  • Skip a payment once per year (once repayment period restarted)4
  • Will cover up to 100% of the school's certified cost of attendance
  • 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 3.47% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.59% APR to 11.69% 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. 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 7/01/2022. 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.

 

Income Based Repayment

Edly Logo

Recommendation
Best for Private Funding
Interest Rates

Variable: 0.00% APR - 23.00% APR1

Repayment Terms

5-10 years

Apply Now More Info
Edly Logo
  • MUST BE a US citizen or permanent resident
  • MUST BE a college junior, college senior, or grad student
  • No co-signer required
  • Get approved in minutes. Pre-qualify without affecting your credit score
  • Income-based repayment with built-in protections, like deferred payments if you lose your job

Edly Student IBR Loans are unsecured personal student loans issued by FinWise Bank, a Utah chartered commercial bank, member FDIC. All loans are subject to eligibility criteria and review of creditworthiness and history. Terms and conditions apply.

Loans from $5,000 - $25,000 Example: $10,000 IBR Loan with a 7% gross income payment percentage for a Senior student making $65,000 annually throughout the life of the loan. Payments deferred for the first 12 months during final year of education. After which, $270 Monthly payment for 12 months. Then $379 Monthly payment for 44 months. Followed by one final payment of $137 for a total of $20,610 paid over the life of the loan.

About this example: The initial payment schedule is set upon receiving final terms and upon confirmation by your school of the loan amount. You may repay this loan at any time by paying an effective APR of 23%. The maximum amount you will pay is $22,500 (not including Late Fees and Returned Check Fees, if any). The maximum number of regularly scheduled payments you will make is 60. You will not pay more than 23% APR. No payment is required if your gross earned income is below $30,000 annually or if you lose your job and cannot find employment.

Sallie Mae Private Student Loans

Recommendation
Best for Private Loans
Interest Rates

Variable rates as low as: 2.39% APR (with autopay)*

Fixed rates as low as: 3.50% APR (with autopay)*

Repayment Terms

Up to four repayment types (including no payments while in school) and multiple repayment terms help you find the loan that fits your budget

Apply Now More Info
Sallie Mae Private Student Loans
  • Variable Rates: Starting variable rates range from 2.39% APR - 12.13% APR (with autopay)*, and will never exceed 13.95% (sometimes lower in certain states as required by law)
  • Fixed Rates: Fixed rates range from 3.50% APR to 13.60% APR (with autopay)*
  • Easy online application!
  • No origination fees, late fees, and no insufficient fund fees. Period
  • Up to four repayment types (including no payments while in school) and multiple repayment terms help you find the loan that fits your budget
  • 0.25% discount when you set up autopay*

*UNDERGRADUATE LOANS: Fixed rates from 3.50% to 13.35% annual percentage rate ("APR") (with autopay), variable rates from  2.59% to 12.13% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.50% to 13.35% APR (with autopay), variable rates from 2.99% to 12.13% APR (with autopay). PARENT LOANS: Fixed rates from 4.23% to 13.60% APR (with autopay), variable rates from 2.39% to 12.13% 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 08/01/2022.

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)

Sallie Mae Private Student Loans

Recommendation
Best for Private Funding
Interest Rates

Fixed: 7.49% APR - 12.99% APR (not including 0.5% ACH discount)*

Repayment Terms

10 years

$20 minimum/month OR interest-only payments while in school

Apply Now More Info
Sallie Mae Private Student Loans
  • Up to $15,000 per academic year with no cosigner required
  • Fixed Rates (APR) from 7.99% to 12.49% (plus an additional 0.5% discount for ACH auto-payments)*
  • No origination fee. No late payment fees. No prepayment penalties.
  • Quick prequalification and rate check that won’t impact your credit
  • Multiple repayment options
  • Dedicated loan officer for every borrower

New student loans of $3,001 up to $15,000 per school year will be granted to residents of eligible states enrolled as undergraduates in bachelor’s degree or equivalent- granting programs at eligible schools.

Funding U offers fixed interest rate loans, without a cosigner, to students who are serious about their academic success and post-grad career. Eligibility is determined by several factors, including: school graduation rate, class hours completed, estimated graduation date, academic record, major; employment or internship experience; and, other academic and non-academic activities that demonstrate the borrower is working hard towards academic and professional goals and is on track to be able to repay debt accrued.

Eligibility is also limited by state of permanent residence. Terms and conditions vary by state. Not all loans are available in all states. Loan amounts available may vary by state.

DISBURSEMENT All Loan proceeds will be sent to the student borrower’s school around the time classes begin, on the date your school prefers. Funding U will require documentation to verify your registration and certify your loan need prior to disbursement. Your school must also certify your loan need. Your loan may be adjusted based upon the amount of need certified by your school.

REPAYMENT TERMS New Undergraduate loans for the 2021-2022 school year will have an Annual Percentage Rate (APR) of 7.49% to 12.99%. All loans have a fixed interest rate range of 7.49%* to 12.99% (before consideration of ACH discount). There is no origination fee. Interest accrues while students are in school.

In-school partial payments: Students may choose either $20 monthly as a “Fixed Payment” while enrolled in school or “Interest Only” payments. These payments will be reported to credit agencies like other student loans. All loans have a 10-year repayment term (paid monthly over 120 months starting 6 months after graduation). Both In-School payment options may not be available in all states. Student’s electing to make Interest-Only payments will receive a 0.5% interest rate discount.

PREPAYMENT PENALTIES There is no prepayment penalty on your loan.

Additional details, terms & conditions will be included in each loan offer.

*The lowest rate shown is available only to juniors & seniors with outstanding academic performance and is not typical of the rates offered to most borrowers. Your actual rate will depend on creditworthiness and other factors, such as your school year and GPA.

How Does Interest Differ from APR (an Example)

Below is a sample comparison of a fixed rate private student loan vs. a Direct PLUS Loan with Origination Fees.

When it comes to the assessment of an origination fee on a federal student loan, it’s important to note the fee will be calculated based on the gross amount you are borrowing. This means you will need to borrow more than you need (to account for the fees).

Scenario:  You want to borrow $20,000 to cover tuition. Both loan options have a fixed interest rate of 5.3% with immediate repayment of principal and interest to keep everything the same, sans the impact of the fees on the APR.

Private Student Loan Loan Terms Direct PLUS Loan
$20,000 Amount Needed $20,000
$20,000 Gross Amount Borrowed $20,884.68*
0% Origination Fee 4.236%
5.30%+ Interest Rate 5.30%
$20,000 Total Loan Amount Applied to Student’s Account
(Gross amount minus fees)
$20,000
10 years Repayment Term 10 years
$5,809.11 Total Interest Paid $6,066.07
$25,809.11 Total Paid Over Life of Loan $26,950.75
5.30% Annual Percentage Rate (APR) 6.213%

*In order receive the full loan amount, you would need to borrow enough to cover the fees. Otherwise, a $20,000 loan would amount to $19,152.80 applied to the student’s account.

+Interest rate in this example is fixed. However, most private student loan lenders also offer variable rates. Today’s lowest APRs start at 1.74%.

Impact on Student Loan Repayment: 10-year Standard Plan

Private Student Loan Repayment Terms Federal PLUS Loan
10 Total Years in Repayment 10
120 Total Months in Repayment 120
$215.08 Monthly Payment Amount $224.59
$25,809.11 Cost of Loan $26,950.75

Here’s one more scenario to consider when looking at repayment.

Let’s review the impact of choosing an income-driven repayment plan offered under the federal student loan program. It’s important to note that Direct PLUS loans borrowed by a parent can’t be repaid under an income-driven repayment plan unless the loan is consolidated into a Direct Consolidation Loan and is repaid under an income-contingent repayment plan.

Scenario: Your $20,000 Direct PLUS Loan was consolidated into a Direct Consolidation loan. The new interest rate of the Direct Consolidation Loan is 5.375%.

You are married with a household size of 4. Your household income is $40,000 and you live in Massachusetts. You are repaying your loan under an income-contingent repayment plan. After 25 years of eligible payments, any remaining loan balance will be forgiven.

Repayment Terms Direct PLUS Loan
Repayment Plan Income Contingent Repayment
Total Years in Repayment 25
Total Months in Repayment 300
Monthly Payment Amount $154 - $0
Total Amount Paid $23,267
Loan Forgiveness Amount $16,734*

*Based on current law, and amount forgiven under and income-driven repayment plan is considered taxable.

What is an Origination Fee

An origination fee is an upfront fee charged to a borrower to cover the cost to process the loan.  This fee is typically a percent of the amount of money borrowed.  The U.S. Department of Education charges origination fees on federal student loans.  The percent charged will be determined by Congress every October 1.  

Private lenders can also charge origination fees but generally they do not.  Private student loans, however, do not possess some of the deferment and repayment benefits that federal student loans have, making the origination fee a willing trade off in many cases. 

How Interest Accrues on Student Loans

Interest accrues on student loans as either simple interest or compound interest. This all boils down to the type of loan you borrow, and the terms provided by the lender. All federal student loan and most private student loans utilize a simple interest formula. 

How Interest is Paid on Student Loans

Federal student loans and most private student loans use what is called Simple Daily Interest to calculate the amount of interest you pay. As you make payments on your student loan, payments will be applied to any outstanding interest first, and the remainder will be applied to your outstanding principal balance.

While you’re in repayment of private student loans, you will likely be in a repayment plan that covers any accumulated interest and some of your principal balance. You will likely see your loan being paid down rather quickly.

When it comes to federal student loans, there are several repayment plan options. While many federal student loan repayment plans cover the accruing interest every month and then pay down a bit of your principal balance, some income-driven repayment plans may actually put your loan in negative amortization. Negative amortization essentially means your payments are not covering your accruing principal every month, and you could increase the total amount you need to repay over time. 

What to Read Next

How Does Student Loan Interest Work

Federal Student Loan Interest Rates

Best Private Student Loans for August 2022

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