INDIANAPOLIS — The rates for federal student loans disbursed after July 1, 2023, vary by education level.
For undergraduates, the fixed rate for Direct Subsidized and Direct Unsubsidized Loans is 5.5%. For graduate or professional students, the fixed rate for Direct Unsubsidized Loans is 7.05%.
Finally, for parents and graduate or professional students, the fixed rate for Direct PLUS Loans is 8.05%.
Elizabeth Renter, with NerdWallet, said she would not characterize the undergraduate rate of 5.5% as abnormally high or abnormally low.
Federal student loan rates are set by federal law and revisited each year. That is why a student may pay a variety of rates post-college.
"If a freshman takes out a loan this year for $10,000, they'll pay 5.5% interest on that loan. If they come back their sophomore year and that rate has changed, they will pay that new rate on their sophomore year," Renter said.
To save money on interest, look to your unsubsidized loans.
"Your loan is accruing interest while you're in school," Renter said. "It may make sense, if you're able to, make interest payments while you're attending school. That saves you from the compounding factor of that interest."
Renter added that handling just that portion of interest might only cost the borrower $50 a month.
Otherwise, after school, borrowers are paying interest on interest.
As for private student loan rates, they can vary based on a person's credit score. While rates could be lower than the federal option, they are likely missing some of Uncle Sam's benefits. That can include forgiveness if you pass away with a remaining balance, and repayment options based on your income.