Private Student Loan Interest Rates

Private student loan rates are calculated based on a published index such as the Prime Rate or London Interbank Offering Rate (LIBOR) plus a "spread" or margin based on your credit score and history. You might see this in your loan paperwork as Libor + 2.5% - meaning the current LIBOR rate plus an additional 2.5%.

If a cosigner is required, your interest rate will be determined based on your credit and your cosigner's credit. Because the interest rate is variable, it will fluctuate over time. Interest begins accruing when the loan is disbursed.

What will your private student loan interest rate be?

It is not possible to determine your exact rate until you apply. However, you can get a feel for where your general interest rate is based on your credit report. The more late payments, overdrawn accounts and other credit issues there are, the more likely it is your interest rate will be higher.

Compare Private Student Loan Interest Rates »

We always recommend checking your credit report and ensuring that it's free of errors, omissions, and inaccuracies before applying for any student loan so that you get the best interest rate possible. Check and improve your credit score here.

How to lower your private student loan interest rate:

If you apply with a cosigner, not only will you increase your chance of getting approved, but you can potentially lower your interest rate depending on you and your cosigner's credit.

Some private student lenders offer discounts to borrowers for automatic debit or consecutive on-time payments. This can translate into significant savings over the course of repayment. The typical discount is 0.25% for signing up for automatic debit (also known as ACH). It is recommended that you contact your lender for a full list of offered benefits.

For more information about private student loans, check out our private loan lenders page, or simply get started and apply for a private student loan.

Apply Now for a Private Student Loan »

Interest Rate Term Glossary

Here is some of the more common jargon and definitions in plain English. If you find something that is not here, feel free to post a comment in our financial aid forum and we will be happy to add it to the list.

• Annual Percentage Rate (APR): a measure of how much interest will be accrued on an annual basis without taking into account compound interest.
• Annual Percentage Yield (APY): the same interest rate measure as APR, but accounts for compound interest - a better measure of how much you will actually pay in interest. Banks and credit card issuers often express credit card interest rates in APR in order to better hide just how much interest would cost. Learn how to calculate APY »
• Index: a statistical indicator that measures changes in the economy in general or in particular areas. In the case of student loans, the federal funds rate and London Interbank Offered Rate (LIBOR) are typically the most commonly used indices.
• Interest Rate: the percentage of a sum of money charged for its use:
  • Example: If you lent $100 for a year at 5% interest, when you are paid back… the total will be $105. That $5 is what you charged to borrow the money.
• Margin: often denoted as +X%; a margin is what the bank charges you in interest above the index it uses to offset your potential credit risk. Basically, the higher your risk, the higher the margin (and vice versa.)
  • Example: If you have bad credit and apply for a credit card, you may be offered Prime + 6.0% or higher as your APR
• Other Rates: Be aware that student loan rates for different programs will vary:
  • Click to find Stafford Rates

PSLINTEREST is worth 25 scholarship points at ScholarshipPoints.com