What Is the Interest Rate for Federal Student Loans?

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Student loan payments can be difficult to keep up with, but by understanding all the requirements of student loans, you can make smarter financial decisions as you go through college and even after you graduate.

On top of paying money towards their monthly student loan payments, students also have to pay interest on their federal and private student loans. The time when interest rates start for federal student loans depends on your loan type.

Direct subsidized loans have lower interest payments than other federal loans because the US department of education covers interest during school enrollment. Direct subsidized loans also have a 6-month grace period upon graduation, meaning you don't have to worry about payments right after graduation.

Direct unsubsidized loans have interest rates that start to accrue as soon as the day they receive the loan until the balance is fulfilled. Because interest accrues as soon as the funds are disbursed, these interest rates are much higher compared to subsidized loans.

Parent PLUS loans are exclusively for parents and guardians who cover the cost of college for their children. Similar to unsubsidized loans, a parent plus loan accrues interest the same day it is lent out to the borrower.

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The U.S. Department of Education sets the interest rates for federal student loans every year. These standardized, fixed interest rates are usually better than the variable interest rates because they stay the same throughout the loan period.

For undergraduate students, direct subsidized loans and direct unsubsidized loans have a 4.99% interest rate on their student loans. Direct unsubsidized loans have a 6.54% interest rate for graduate or professional students. Finally, direct PLUS loans for parents and graduate or professional students have a 7.54% interest rate.