What is considered a high interest rate?

By Anna Baluch | Published on October 21, 2025

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When it comes to student loans, even a few percentage points can make a big difference. For example, the lifetime cost of a $35,000 loan with a 6% interest rate is more than $7,000 higher than the same loan at 4%. That’s why understanding what qualifies as a “high” interest rate—and how to avoid one—matters so much.

In this article, we’ll break down the average rates for federal and private student loans, explain what makes an interest rate “high,” and offer tips to help you qualify for a lower rate.

What is considered a high interest rate?

Generally, an interest rate is considered high when it exceeds the average rates for similar loans. For example, average interest rates for private student loans fall in the 3.45% and 16.24% range in 2025, according to Education Data Initiative. Private student loan rates that are higher than 16.24% are considered high.

Also, rates for unsecured loans are usually higher than rates for secured loans because unsecured loans don’t require collateral or a valuable asset you own, like a house or car, and therefore pose a greater risk for lenders.

Secured loans, which are backed by collateral and allow lenders to claim your asset in the event you default on your loan, are less risky. Keep in mind that student loans are typically unsecured, meaning you don’t have to pledge collateral to take them out but can expect higher rates than secured loans, like mortgages, for example.

Federal student loans interest rates

Each spring, Congress sets new rates for federal student loans. These rates are fixed and distributed from July 1 to June 30 the following year. Note that federal rates don’t consider your creditworthiness and are usually a bit higher than the rates of private student loans. The upside is that federal loans offer special protections, such as income-driven repayment plans and student loan forgiveness*.

• A federal court issued a new injunction preventing the U.S. Department of Education from implementing the Saving on a Valuable Education (SAVE) Plan and parts of other income-driven repayment (IDR) plans. Please refer to studentaid.gov for the current status of these plans. For the most up-to-date rates for federal student loans, please visit Interest Rates and Fees for Federal Student Loans on the Federal Student Aid website.

Private student loan interest rates

While rates for private student loans¹ vary, private lenders usually use an economic benchmark, such as the Secured Overnight Financing Rate (SOFR) index to help set their rates. Your rate will also depend on factors that are in your control, such as your credit score and income. Plus, you’ll be able to choose between variable and fixed rates. Compared to federal student loan rates, private rates tend to be lower.

This is because rates are more flexible and based on factors like your credit, income, and whether you have a cosigner. If you have a good credit score, stable income, and/or a cosigner with solid finances, you may be able to secure a lower interest rate with a private student loan.

For current rates on Earnest student loans, please visit https://www.earnest.com/student-loans.

How to secure a good rate on private student loans

These tips can help you lock in a more competitive rate with a private student loan:

• Improve your credit: If you decide on a private student loan, it’s a good idea to boost your credit score before you apply. To do so, pay your bills on time, repay debt, and only apply for new credit when you absolutely need to.

• Apply with a co-signer: If you have a trustworthy friend or family member with good credit and a stable income, they can cosign your loan and help you land a lower rate than you might be able to on your own. The caveat is that they’ll be on the hook for your payments if you default.

• Shop around: Private student loan rates are not created equal. Do your research and compare all your options. Fortunately, many lenders let you prequalify and check your rates without any impact on your credit.

• Refinance: If you already have student loans, you might be able to refinance² them and potentially receive a lower interest rate³. Just keep in mind that if you refinance federal student loans, you will miss out on protections, like forbearance and loan forgiveness.

Check your rate or refinance with Earnest

Generally speaking, a high interest rate is a rate that’s higher than the rates you see for federal loans and most private loans. If you’re looking for a low rate and flexible terms, Earnest may be a good option.

To discover the types of rates you might qualify for, get a free rate check today in about two minutes with no effect on your credit score. With our 100% Rate Match Guarantee⁴, we’ll match any competitor’s rate and give you a $100 Amazon gift card once the process is complete.

You may also refinance with Earnest and secure a lower rate than what you’re currently paying. Believe it or not, we don’t charge any fees, including application, origination, prepayment, and late fees. Plus, we let you refinance⁵ multiple times to accommodate your financial situation as your circumstances change.

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About the Author

Anna Baluch

Anna Baluch is a freelance finance writer from Cleveland, OH. She enjoys writing content that helps people from all walks of life make good financial decisions. Her areas of expertise include student loans, refinancing, mortgages, personal loans, budgeting, and debt management.

Disclaimer

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