Student loan interest rates, explained | Earnest

Everything you need to know about student loan interest rates

By Scarlett Li | Published on May 6, 2026

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TL;DR

Federal student loan interest rates are set by the federal government by July 1st and remain the same through June 30 of the next year.
Private student loan interest rates depend on your credit and vary by lender.
To lower your student loan interest rate, refinance private loans, leverage discounts, negotiate, and/or find a cosigner.
If you take out private student loans, you may choose fixed rates that stay the same or variable rates that fluctuate over time.

Table of Contents

If you pay for college with student loans, interest rates will determine how much your education will cost over time. The lower your rates, the less you’ll spend. Higher rates can significantly increase your monthly payments and total loan cost.

As of 2026, student loan interest rates have leveled off, after significant increases in 2023 and 2024. Despite this, they remain elevated compared to historic lows in the early 2020s.

Federal student loan rates now fall between 6% to 9%, depending on the loan program. Private student loan interest rates vary based on lender and applicant’s credit, making refinancing worthwhile for higher rate loans.

What are current student loan refinancing rates?

Data from the Federal Reserve Bank of St. Louis shows that after fluctuations the past few years, student loan refinancing rates have stabilized. If you have good credit, you may lock in a good rate and potentially save thousands over your loan term.

Check Earnest’s refinancing page to find our current refinancing rates. Keep in mind that these are our lowest starting rates and contain our .25% Auto Pay discount2, which borrowers can get by signing up for automatic payments from a checking or savings account. Some borrowers may see higher rates based on their credit.

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What affects student loan refinancing rates?

Refinancing your student loans means you’ll replace your current loans with a new one from a private lender. When you do so, you can lock in a lower interest rate than the rates you’re currently paying.

If your credit score has improved since you originally took out your student loans or rates have gone down, there’s a good chance you’ll qualify for a better rate. Since this strategy is a fairly easy and effective way to reduce your rate, it’s definitely worth exploring. Check out our refinancing calculator to get an idea of how much you might be able to save.

What’s the difference between federal student loan and private student loan interest rates?

Student loan interest rates vary depending on the type of loan you choose. They also determine how much money you’ll end up paying back over the life of the loan.

There are two kinds of student loans: federal and private. Federal student loans such as Stafford loans are made through the U.S. Department of Education, whereas private student loans are offered by private lenders, such as banks, credit unions, or financial institutions.

Federal loans usually offer better terms, lower rates, and loan forgiveness, but may not cover your full education costs. Private loans can fill gaps, but interest rates vary and those with good credit qualify for the lowest rates. With a private loan, you may also cover up to 100% of the cost of attendance as certified by your school. Plus, lenders like Earnest offer private loans for international students with a U.S.-based cosigner and Deferred Action for Childhood Arrivals (DACA) students.

If you’re looking to borrow money for school, you should know what the current student loan interest rates are and how they may impact your ability to afford the payments.

What are federal student loan interest rates in 2026?

The interest rates for federal student loans for the coming academic year are set each year and usually announced in May or June. Those rates apply to Direct Loans first disbursed from July 1st to June 30 of the following year.

Check out the U.S. Department of Education site for the current federal student loans interest rates.

Federal student loan interest rates work differently, depending on the type of borrower, and require you to fill out the Free Application for Federal Student Aid (FAFSA).

Undergraduates: With subsidized loans, the government pays your interest while you’re enrolled in school. If you don’t qualify for subsidized loans, you’ll be able to take out unsubsidized loans. Once the loan is disbursed, interest begins accruing. You'll be responsible for paying all the interest on these loans. In other words, you should always prioritize subsidized loans because they are cheaper in the long run.
Graduate students: If you’re a grad student, you can only take out unsubsidized loans and Grad PLUS loans. Direct unsubsidized loans have a lower interest rate than Grad PLUS loans, but also have borrowing caps. New borrowers will no longer be able to take out Grad PLUS loans after July 1st, 2026.
Parents: Parents have only one federal loan option to help pay for their child’s education: the Parent PLUS loan, which will have an annual cap of $20,000 and lifetime cap of $65,000 per dependent as of July 1, 2026. To qualify, you have to be the biological or adoptive parent of a dependent undergraduate student with good credit. Loan payments start upon disbursement, unless you file for deferment. You are responsible for interest that accrues during deferment.

How are student loan interest rates set?

Federal student loan interest rates and private student loan interest rates tend to follow prevailing trends in the economy and markets. As such, interest rates of loan types tend to move in tandem with each other. When federal student loan interest rates go down, private student loan interest rates are likely to follow.

Here’s a quick comparison:

Who sets the rates?

Credit impact?

Federal student loans

Congress

No impact; everyone receives the same federal rates

Private student loans

Private lenders

Yes; the higher your credit score, the lower rates you may secure

What affects federal student loan interest rates?

Congress sets federal student loan interest rates in the spring. The new rates are determined based on the 10-year Treasury notes auction in May, and apply to loans disbursed between July 1 and June 30 of the next year.

Federal student loans have fixed interest rates, which means they stay the same for the life of the loan. In addition, your credit and finances won’t affect your federal student loan interest rate.

The interest rates work differently for subsidized and unsubsidized federal student loans. If your loan is subsidized, the government pays the interest while you’re enrolled in school at least half time, during your grace period, and while your loan is in deferment.

If you have an unsubsidized federal student loan, that means the interest charges start accumulating when the funds are disbursed. If you put off paying your loans, the accrued interest gets added to the principal balance when the repayment period begins.

What affects private student loan interest rates?

Private student loans are issued by individual lenders, which means some lenders may have higher rates than others. Private student loan interest rates may be fixed or variable. If you choose the variable-rate option, your interest rate may go up or down over the life of the loan.

Private student loan interest rates are often determined by the prime or the Secured Overnight Financial Rate (SOFR) rate. Student loan lenders also use your credit score, income, and overall financial health to determine what your interest rate will be. Lenders will typically reward student loan borrowers with higher credit scores and a stable financial history with lower interest rates. Those with creditworthy cosigners can also qualify for better rates.

When lenders check your credit, it’s usually considered a “hard inquiry,” which can lower your credit score a few points. You can usually preview your rates and terms with only a soft credit check, which doesn’t negatively impact your credit score.

Check Earnest's student loan page to find our current rates for new student loans. Keep in mind our lowest rates are only available for our most credit-qualified borrowers (or borrowers with creditworthy cosigners) and contain our .25% Auto Pay discount2 from a checking or savings account.

How do you calculate student loan interest?

Private student loan interest accrues daily. So how do you calculate how much interest you’ll pay each month?

Suppose you borrow $20,000 at a fixed annual percentage interest rate of 8%. If you’re on a 10-year standard student loan repayment plan, your monthly payment would be about $242.70 for a total cost of $29,119*.

Follow these three steps figure out your monthly interest4:

1. Figure out your daily interest rate. Divide your annual student loan interest rate by the number of days in the year.

.08/365 = 0.00022 or .022%

2. Calculate the daily interest accrued on your loan. Multiply your outstanding loan balance by the daily interest rate.

$20,000 x 0.00022 = $4.40

3. Calculate your monthly interest payment. Multiply the daily interest from Step 2 by the number of days in the month.

$4.40 x 30 = $132

If your private student loan is in a normal repayment plan, interest accrues every day, but doesn’t compound daily. That means you’ll pay the same amount of interest each day of the repayment period, but you typically won’t pay additional interest on the interest. Check out our student loan calculator to quickly calculate your monthly payments.

*Rate and payment example listed above is for illustrative purposes only and may not be representative of rates or terms offered by Earnest.

What are the best ways to lower private student loan interest rates?

If your credit score and finances are healthy, you may be able to lower your private student loan interest rate. Here are several options:

1. Refinance your private student loans

The goal of refinancing is to trade your existing loan for one with a lower interest rate. When you refinance, your new lender will pay off your old loan, and you’ll make payments on the new one going forward.

To qualify for a refinance, you’ll need a credit score in the good to excellent range (or a cosigner with good credit), and a steady income that allows you to afford your student loan payments along with other bills, like rent, groceries, and credit cards without feeling pinched.

Another perk of a lower-rate loan is they usually come with shorter repayment terms. The faster you can repay your student loan, the less interest you’ll pay over time, which could save you a lot of money over the life of the loan.

2. Take advantage of discounts

Signing up for auto pay is another way to lower your student loan interest rate. Earnest offers a 0.25% discount when you sign up for Auto Pay2. Check with your lender to see if they offer an auto pay discount.

Auto Pay also safeguards against accidental missed payments. Just make sure you have enough in your bank account so you don’t get hit with overdraft or low balance fees.

Some lenders offer a loyalty discount, too. For example, Earnest offers a 0.25% rate discount for returning borrowers4.

3. Negotiate a lower interest rate

It may be worthwhile to comparison shop for a more competitive student loan rate, especially when rates are low. At Earnest, we offer a 100% Rate Match Guarantee5, which states that if you find a lower rate elsewhere, we’ll match it plus reward you with a $100 Amazon gift card. All you have to do is show us a screenshot of your Loan Approval Disclosure.

4. Secure a cosigner

Adding a cosigner with good credit and stable income may also help lower your interest rate. However, it’s risky because the cosigner becomes responsible for your loan, and both your credit histories could be negatively impacted if you aren’t able to make the payments.

What is the difference between annual percentage rate (APR) and student loan interest rate?

The interest rate is basically the cost of borrowing money from a particular lender. Each month the accrued interest will be added to the principal due in your monthly payment until you pay the principal back in full.

The APR, or annual percentage rate, on the other hand, includes any origination fee or other costs that may be added when signing your loan agreement in addition to the interest rate.

Therefore, APR is a more accurate indicator of how much you’ll pay on top of principal. With the Truth in Lending Act, lenders are required to disclose the APR before you sign a loan or take on a credit obligation. Learn more about the difference between the APR and interest rate.

What type of interest rate should you pick for your student loan: fixed or variable?

When applying for a private student loan or refinancing, you typically have a choice between fixed and variable interest rates.

Here’s a quick breakdown of how fixed and variable-rate student loans compare:

Fixed-rate student loans

Variable-rate student loans

Which loans have them?

Federal and private

Private

Monthly payment

Stays the same

Fluctuates

Starting rate

Higher

Usually lower

Predictability

High

Low

Best for

Budgeting, long-term planning

Short-term savings, extra payments

The interest rates tend to be higher with a fixed-rate loan, but they stay the same over the life of the loan. Federal student loans always have fixed interest rates, and the rate is the same for all borrowers, regardless of their finances or credit history.

Private student loan lenders offer both fixed and variable-rate loans. While variable-rate loans often start out with lower interest rates, the risk is that those rates can fluctuate, and may increase over time depending on the rate benchmark the lender uses (often the prime or SOFR rate).

You may opt for a fixed-rate loan if you want a steady monthly payment and interest rate, and if you’re more comfortable knowing the exact loan amount you’ll end up paying back. A variable-rate loan may be appealing if you’re looking for a lower interest rate or to save money, or you plan to make extra payments to knock down the principal and pay off your loan faster.

See how much you could save with Earnest

If you’re ready to apply for student loans or refinance current ones, shop multiple lenders to get the best student loan interest rates. Earnest offers some of the lowest rates around, with flexible terms and features to fit your repayment timeline and budget.

To see how much money you could save by refinancing, check your rate with Earnest today. It takes just minutes, and it won’t negatively impact your credit score.

If you’re looking for a private student loan, check your eligibility with Earnest in two minutes. It’s fast, free, and won’t hurt your credit score.

About the Author

Scarlett Li

Scarlett Li is the Associate General Manager of Private Student Loans at Earnest.

Disclaimer

This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.