What is a typical interest rate on a college loan?

What is a typical interest rate on a college loan?

Revised on November 28th, 2010 at 11:08 pm | Financial Aid Counselor | Article of: Student Loan Basics | Resource for: |

If you are planning to applying for a student loans, you may be trying to establish a rough calculation of how much a total college tuition and fees are going to cost you. So it totally normal to learn about financial aid and loan process, most importantly how much is a typical interest rate for a college loan student usually apply for? We will explain this here.

What is the average interest rate for college student loans?

There are lots of factors to take into consideration when figuring out the average interest rates charges on student loans, as you might assume, since there are different types of loans and offered by different financial institutions. One thing that doesn’t seem to be important is the credit score, as most student loans are processed by financial aid to begin with.

Subsidized or Unsubsidized loan: you probably applied for financial through FAFSA already and check off the apply for loan option in there as well. After a week or two, you will be notified what kind of loans you qualify for. If you are low income student, you will be eligible for subsidized loan for which you won’t have to worry about interest rates since the government will be paying for you. But if you need more money than is offered by subsidized or just don’t qualify for that, then you will be applying for unsubsidized student loans. For this you will have to compare between the loan offer from different companies that you will see along with their interest rates.

Here is an easy to read student loan interest rates comparison:

Loan Program


Eligibility Award Amounts
Interest Rates Lender/Length of Repayment
Federal Perkins Loans
Undergraduate  and    graduate students Undergraduate—up to $5,500 a year (maximum of $27,500

as an undergraduate)

Graduate—up to $8,000 a year (maximum of $60,000, including undergraduate loans)

Amount actually received depends on financial need, amount of other aid, availability of funds at school

5% Lender is your school

Repay your school or its agent

Up to 10 years to repay, depending on amount owed

FFEL

Stafford Loans

(subsidized and unsubsidized)

Undergraduate and graduate students; must be enrolled at least half-time* Depends on grade level in school and dependency status (see chart on page 20)

Financial need is required for subsidized loans

Financial need is not necessary for unsubsidized loans

Fixed rate of 5.6% for subsidized loans with a first disbursement  date between  July 1, 2009 and June 30, 2010 (see page 17 for more information)

Fixed rate of 6.8% for subsidized loans made to graduate students and for all unsubsidized loans

The federal government pays interest on subsidized loans during school and certain other periods

The borrower pays all interest on unsubsidized loans

Lender is a bank, credit union or other participating private lender

Repay the loan holder or its agent

Between 10 and 25 years to repay, depending on amount owed and type of repayment plan selected

Direct

Stafford Loans

(subsidized and unsubsidized)

Same as above Same as above Same as above Lender is the U.S. Department

of Education; repay Department

Between 10 and 25 years to repay, depending on amount owed and type of repayment plan selected

FFEL

PLUS Loans

Parents of dependent undergraduate students enrolled at least half-time* (see dependency status)

Graduate or professional degree students enrolled at least half-time

Borrower must not have negative credit history

Student’s Cost of Attendance*

– Other aid student receives

= Maximum loan amount

Fixed rate at 8.5%; borrower pays all interest Same as for

FFEL Stafford Loans above

Direct

PLUS Loans

Same as above Same as above Fixed rate at 7.9%; borrower pays all interest Same as for Direct Stafford

Loans above

The Difference: There were some law changes in year 2010 to benefits students. You should get the money from Direct Loan program (7.9%) instead of the PLUS loan than in the FFEL program (8.5%) due to lower interest rate. Which bank did you get the loan from: Wells Fargo Bank, Citi Bank, Chase Student Loans and companies offer different rates.

In School Rate versus In Repayment Schedule Rate: Your loan interest rates will also vary depending upon whether you are in the school or have graduation and entered the repayment period. This is important information to pay attention to especially if you are entering grace period or plan to defer the repayments for a while.

Date Disbursed Type In-School Rate Repayment Rate
7/2010-6/2012 Stafford 6.80% 6.80%
PLUS 7.90% 7.90%
7/2006-6/2010 Stafford 6.80% 6.80%
PLUS (FFEL) 8.50%
(DL) 7.90%
(FFEL) 8.50%
(DL) 7.90%
7/1998-6/2006 Stafford 1.87% 2.47%
PLUS 3.27% 3.27%
7/1995-6/1998 Stafford 2.67% 3.27%
PLUS 3.39% 3.39%
7/1994-6/1995 Stafford 3.27% 3.27%
PLUS 3.39% 3.39%
10/1992-6/1994 Stafford 3.27% 3.27%
PLUS 3.39% 3.39%

When was the loan disbursed? A new subsidized and unsubsidized loans first disbursed on or after July 1, 2006, has a fixed interest rate of 6.80%; the only exceptions to this rule is for subsidized undergraduate loans, which as interest rates as following:

Date of First Disbursement Interest Rate for Subsidized Undergraduate Loan
7/1/08–6/30/09 6.00%
7/1/09–6/30/10 5.60%
7/1/10–6/30/11 4.50%

This article is useful for following information:

  • typical student loan interest rate
  • average interest rate on college loans

One Response to “What is a typical interest rate on a college loan?”

  1. FinAid Resource on November 28, 2010

    Like the author said, it depends on the loan so it won’t do any good because the current interest rates will not remain same; that’s why students should get low fixed interest loans. I think it is good to note that all federal loans are put on a 10 year payment plan once the student graduates or drops his college enrollment below half time; if you start to take more classes next semester, the payment plan will not be affected. I would strongly advice any college students applying for student loans to look around and get educated about them so you won’t get in too much debt before you are even done with the school.

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