Email FacebookTwitterMenu burgerClose thin

What Is the Average Student Loan Interest Rate and Payment?


Research from shows that almost 45.3 million Americans hold an average federal student loan debt balance of $37,338. Combined, student loan debt in the U.S. adds up to nearly $2 trillion. According to the same data, the average student loan monthly payment is $503. This is debt that needs a specific plan to make sure you’re able to get out of it as quickly as possible to limit how much you’ll pay.

A financial advisor can help you manage your student loan repayment plan effectively so that you can become debt-free.

Interest on Private vs. Federal Student Loans

Interest rates on private and federal student loans can vary significantly based on several factors, including the type of loan, the lender, the borrower’s creditworthiness, and market conditions. Here’s a general overview:

Federal Student Loans

Federal student loans are offered by the U.S. Department of Education and interest rates are generally set as fixed rates by the government. There are several types of federal student loans with specific rates: 

  • Direct subsidized and unsubsidized loans: These are undergraduate student loans. For loans disbursed between July 1, 2023 and July 1, 2024, the interest rate is 5.50% for both subsidized and unsubsidized loans.
  • Direct unsubsidized loans for graduate and professional students: For loans disbursed between July 1, 2023 and July 1, 2024, the interest rate is 7.05%.
  • Direct PLUS loans for parents and graduate students: For loans disbursed between July 1, 2023 and July 1, 2024, the interest rate is 8.05%.
  • Interest subsidy: For Direct Subsidized Loans, the government pays the interest while the borrower is in school and during certain deferment periods.

Private Student Loans:

You can get a private student loan at a bank, credit union or another financial institution. Interest rates for private student loans can vary and are influenced by the borrower’s credit history, the lender’s policies and overall market conditions. These loans include:

  • Fixed interest rates: Some private lenders offer fixed interest rates, which remain constant over the life of the loan.
  • Variable interest rates: Other private lenders offer variable interest rates that can change periodically based on market fluctuations. Variable rates may start lower than fixed rates but can increase over time.
  • Creditworthiness: Private lenders often consider the borrower’s credit score and credit history when determining the interest rate. Borrowers with strong credit may qualify for lower rates.
  • Cosigner: Some private lenders allow borrowers to apply with a co-signer, which can help secure a lower interest rate if the cosigner has good credit.

What Can Impact Your Total Student Loan Payment

High school graduate applying for a student loan

Here are 10 common factors that can influence how much you pay in student loan payments:

  • Loan amount: How much you borrow will have a direct impact on your monthly payment. Generally, the larger the loan amount, the higher the monthly payments.
  • Interest rate: Your interest rate on a student loan determines how much interest accrues on the loan balance. A higher interest rate will mean higher monthly interest charges and a higher total payment.
  • Loan term: The length of time that you have to repay a loan will significantly impact your monthly payment. A shorter loan term typically means higher monthly payments, but lower overall interest costs. While a longer loan term will have lower monthly payments and higher overall interest costs.
  • Repayment plan: The type of plan that you choose to pay back your loan will also affect your monthly payment. Federal student loans offer various repayment plans, including standard repayment, income-driven repayment (IDR), extended repayment and graduated repayment. IDR plans to adjust monthly payments based on income and family size, which can potentially lead to lower payments.
  • Grace period and deferment: Some loans can offer a grace period after graduation before repayment begins. Additionally, other circumstances like re-enrolling in school or financial hardship could allow you to defer payments temporarily. While this doesn’t directly impact the total payment, it can affect the timing of your payments and the total interest accrued.
  • Consolidation and refinancing: Consolidating multiple loans with a private lender can simplify payments, but also extend your loan term and lead to higher overall interest costs. Refinancing can lower interest rates and payments but could make you give up federal loan benefits.
  • Extra payments: Making extra payments beyond the required monthly amount can help you pay off your loan faster and reduce the total interest you’ll pay over time.
  • Income and employment: If you have federal loans and choose an income-driven repayment (IDR) plan, your monthly payment will be based on your income and family size. Changes in your income or employment situation can impact your payment amount.
  • Late payments and fees: Late payments or missed payments can result in fees and additional interest charges, increasing your total payment.
  • Loan forgiveness: Depending on your eligibility, loan forgiveness programs, like Public Service Loan Forgiveness (PSLF) or income-driven forgiveness, can reduce your total payment or forgive your remaining balance after a certain number of qualifying payments.

Tips for Preparing to Repay Your Student Loans

Preparing to repay your student loans is an important step to manage your finances effectively and avoid potential challenges. Here are 13 common tips to help you prepare:

  • Know your loans: Make sure you understand the details for each of your student loans, including the types of loans, interest rates, loan servicers and repayment terms. This information will help you determine a repayment strategy.
  • Create a budget: Develop a budget that outlines your income, expenses and financial goals. Then, allocate part of that budget to loan payments so that you can meet obligations without compromising your finances.
  • Explore repayment plans: Research and choose the right repayment plan for your situation. Federal student loans offer various plans, including standard repayment, income-driven repayment (IDR) and graduated repayment. Consider how each plan will affect your monthly payments and total repayment.
  • Calculate your monthly payments: SmartAsset’s student loan calculator can help you get an estimate for what to expect and plan your budget accordingly.
  • Set up autopay: Enroll in autopay through your loan servicer. This deducts your payments automatically from your bank account each month and reduces the risk of missing a payment, which could ultimately qualify you for an interest rate reduction.
  • Create an emergency fund: Set up an emergency fund with enough funds to cover several months’ worth of expenses. This safety net can help you continue making payments even when unexpected expenses happen.
  • Explore loan forgiveness options: If you’re eligible for loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF) or income-driven forgiveness, make sure you know the requirements and the application process so that you can meet the criteria.
  • Communicate with your loan servicer: Keep your loan servicer informed of any changes in your contact information or financial circumstances. They can provide guidance on repayment options and assist if you have difficulties.
  • Prioritize high-interest loans: If you have multiple loans, consider directing extra payments toward loans with higher interest rates. This can save you money in the long run by reducing the overall interest you’ll pay.
  • Understand grace periods: Know when your grace period ends and when your first payment is due. This can help you plan your budget and set up repayment arrangements.
  • Consider extra payments: If your budget is big enough, consider making extra payments on your loans. Even a small additional amount can help you reduce your principal balance and save on interest.
  • Stay informed: Keep up-to-date on loan term changes, repayment options, or loan forgiveness programs. Check your loan servicer’s website regularly and read correspondence from them.
  • Get financial assistance: If you’re facing financial hardship, reach out to your loan servicer to discuss options like deferment, forbearance, or income-driven repayment plans.

Bottom Line

Graduating student looking at what she owes

The goal of your student loan repayment plan should be to manage your debt responsibly while maintaining your overall financial health. With careful consideration, you can make the repayment process more effective for your finances and help you become debt-free.

Tips to Repay Your Student Loan

  • Whether you’re thinking about going back to college or financing the education of a loved one, a financial advisor can help you put a plan together to reach those goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you’re thinking about refinancing your student loan, make sure you compare student loan refinance rates to make a smart decision.

Photo credit: ©, ©, ©