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Average Government Student Loan Interest Rate

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Repaying Your Canada Student Loans

Federal student loan interest rates are lowest they’ve been in years

If you have a government student loan, you have a six-month grace period when you graduate before you must start repaying your student loans. During that time, youll receive a letter in the mail outlining your loans interest rate and monthly payment. Your loan will usually default to a fixed interest rate, but if youd prefer your Canada student loan interest rate to be a variable interest rate, you can call your loan provider to make this change. If youd like to pay more toward your student loan to pay it off sooner, you can contact your provincial or federal student loan centre to change your payment terms.

Paying down your student loans is a long and arduous process, but there are ways to speed up your debt repayment progress. A tried-and-true method is to apply for student loan forgiveness . Many provinces offer student loan forgiveness to individuals working in specific professions.

For example, if you are a nurse and you are working in a rural area, you may be eligible to have some of your student loans forgiven. Another typical student loan forgiveness program is to forgive loans through non-refundable tax credits, as long as you live and work in your home province. These loan forgiveness programs can reduce your student loan debt by thousands and dramatically decrease the length of your loan, so its worthwhile to research loan forgiveness programs in your province.

How Are Student Loan Interest Rates Set

Since 2013, federal student loan interest rates are set each year based on the 10-year Treasury note rate following the May auction .

There is a set margin of 2.05 percentage points for undergraduate student loans, 3.60 points for graduate student loans and 4.60 points for PLUS loans. Rates are fixed for the life of the loan, although rates for new loans are set each year.

Here are the calculations for 2017-18:
  • Undergraduate student loans 40 rate plus 2.05 percentage points equals 4.45% interest rate.
  • Graduate student loans 40 rate plus 3.60 percentage points equals 6.00% interest rate.
  • PLUS loans 40 rate plus 4.60 points equals 7% interest rate.

The current interest rate system was established in 2013, when President Barack Obama signed the Bipartisan Student Loan Certainty Act. After July 1, 2013, all annual percentage rates were linked to the 10-year U.S. Treasury Rate. The law also capped all Stafford loan rates at 8.25% and 9.50% .

U.S. Sen. Richard Burr said the law has saved borrowers about $58-million in student loan interest since it was enacted.

How Does Private Student Loan Interest Work

One of the best benefits of private student loans is that the borrower can review different lenders before making a decision and review their fixed and variable interest rate offers. When considering for applying for private student loans, make sure that you fully understand the concept of interest rates, especially variable interest rates/variable APR and the potential for the rate to increase or decrease over the life of the loan. As the market shifts, private student loan interest rates will also shift. Many applicants choose private loans because interest rates can be much lower than the fixed interest rates/fixed APR attached to federal student loans.

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Average Student Loan Interest Rates In 2022

Content provided by Credible. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.

This article was first published on the Credible blog.

From 2006 through 2022, average federal student loan interest rates were:

  • 4.60% for undergraduates

  • 6.16% for graduate students

  • 7.20% for parents and graduate students taking out PLUS loans

Knowing student loan interest rates for both federal and private student loans can help you make informed decisions when refinancing student loans or applying for private student loans, saving you money and giving you peace of mind.

For example, if you were paying 7% interest on a 15-year, $50,000 loan, youd pay almost $10,000 in additional interest charges compared to a borrower taking out the same loan with a 5% interest rate.

If you decide to get a private student loan, be sure to consider as many lenders as possible so you can find the right loan for your needs. Credible makes this easy: You can compare your prequalified rates from multiple lenders in two minutes without affecting your credit.

Repayment Of Government Student Loans

What Are the Average Student Loan Interest Rates?

Loans backed by the government are less difficult to repay as interest rates are lower, and are not expected to be paid back until 6-months following your graduation. Furthermore, the government provides students a six-month grace period after graduating before requiring repayment of the loan.

Grace Period

This six-month term is interest-free, which means youll be able to pay off your principal loan straight away. Moreover, you can start making payments while you are still in school. Doing so can be great as early payment reduces the total amount of debt owed and speeds up the payback process.

Interest Rates

Government loans also have a fixed interest rate which can be altered to a variable interest rate depending on your needs. All in all, the whole repayment process is quite simple. Once youve graduated, the government will send you a letter describing your loan, interest, and payback plan. Your repayment plan and accumulated interest depends on the loan amount which you received throughout your studies, and thus varies for each individual.

Student Loan Forgiveness In Canada

If youre strapped for cash and worried about repayment, students can apply for forgiveness programmes from the government. Specific qualifying criteria vary by location, however, you may be able to have a portion of your debt forgiven.

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Learn About Typical Student Loan Rates As You Weigh Your Student Loan Options

If you have student debt or are planning to borrow money for college, pay special attention to your student loan interest rates. The higher the rates, the more youll pay, while lower rates will mean repaying less.

So what is the average student loan interest rate? Form 2006 through 2021, average federal student loan rates were 4.66% and 6.22% for undergraduate and graduate loans, respectively. However, your rate may be well outside this range, depending on the type of loan you take out, including federal and private student loans, as well as whether you had a cosigner.

Heres an overview of the average student loan interest rates you can expect, along with an explanation of how these rates are set.

Student Loans From Banks

Banks provide a variety of loans including home loans, car loans, and personal loans. Similarly, you can use a bank to get a student loan to pay for your college or university tuition. Banks provide you with loans that must be repaid monthly over a set period of time. However, some banks provide special terms such as interest-only payments during school and after graduation up to a certain number of years. Since your bank loan would be repaid in monthly installments, it is best to borrow only what you need to keep your payments manageable.

Do note, that banks often have high requirements, so qualifying for a student loan may be difficult. However, if you have good credit and stable finances, you may be able to take advantage of their low-interest rates and flexible terms.

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What Are The Federal Student Loan Interest Rates

Federal student loan interest rates can change from year to year, so its important to always look at this number for your current school year.

For the 2022 2023 academic year, the fixed interest rates for federal student loans are:

  • 99% for direct subsidized and unsubsidized loans for undergraduates
  • 54% for unsubsidized loans for graduates
  • 54% for parent and grad PLUS loans

We Offer Major Help And Minor Stress

Federal student loan interest rates increase makes borrowing college money more expensive

Well help guide you through the process to find the right loan term, interest rate, and payments right for you and the family budget.

Here are some key dates to plan for prior to sending your student off to school.

Shop around for the right loan using our prequalification tool to see your estimated rates.

Make sure you’ve received confirmation that the money is scheduled to be sent to your school.

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What To Look Out For With Student Loan Interest Rates

Federal student loans are the most common and offer fixed interest rates. With a fixed rate, the APR you get at the time you take out your loan is the rate you are stuck with for the entire life of the loan .

Private student loans typically come with higher interest rates than federal loans. Because of the lower rates and the protections that federal loans offer, you should first try maxing out your financing options through the government before you shop around for a private loan.

Private student loans have a fixed or variable APR, and your rate is determined by your specific lender. Generally, lenders look at potential borrowers’ credit scores and income to make sure they have a solid financial standing to qualify for a loan.

What Is Your Average Student Loan Interest Rate

If your loans were provided by the government, the rates on each loan may be found on the chart above. If you have more than one loan with different interest rates, your average interest rate will be somewhere in between.

If you combine your government student loans into a single federal Direct Consolidation Loan, you wont get a lower interest rate. Your interest rate will be the weighted average of the rates on your existing loans, rounded up to the nearest 1/8th of a percentage point.

Your average interest rate may depend on your field of study, profession or loan provider. Graduate students tend to have loans with higher interest rates.

You can also consolidate private and federal student loans by refinancing them, potentially at a lower interest rate.

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Federal Student Loan Interest Rates: 2019

Student loan interest rates will decrease for the 2019-2020 school year for all federal loan types disbursed between July 1, 2019 and July 1, 2020. The disbursement date for any student loan is the date on which you receive payment from the lender. Below, we have listed the current student loan rates on the available types of federal loans. Note that these percentages represent the amount of interest you will pay on an annual basis.

Loan Type

Accessing Money From Your Student Line Of Credit

Am I Average?

You should be able to access the available credit in your student line of credit soon after:

  • youve signed all of the necessary documents
  • your application is approved

You can usually access the available credit from your student line of credit at:

  • a branch of your financial institution
  • an ATM
  • through online, mobile or telephone banking

Some lines of credit will also let you access the money by writing a cheque.

Financial institutions each have their own terms and conditions for the lines of credit that they offer. Speak with your financial institution for more information about the student borrowing options they offer.

Borrow only as much money as you need to cover your needs while studying. Think about whether youll be able to make at least the interest payments while youre studying. Also think about whether youll be able to repay the money that you borrow from a line of credit when you graduate.

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Whats The Average Interest Student Loan Rate

When it comes to federal student loan interest rates, there technically is no average because rates are set by the government each year and do not change based on the characteristics of individual borrowers. This means there is just one set rate for each type of loan.

The average student loan rate varies only depending on the type of loan including whether its a federal or private loan and the type of degree.

The rates for private student loans, on the other hand, are determined by each lender and can vary depending on the qualifications of the borrower.

How Does Federal Student Loan Interest Work

When looking at the interest on federal loans, remember that they are not credit-based loans, which means that your eligibility for approval is not based on any minimum credit score. Federal loans have a fixed interest rate and, depending on market conditions, are commonly higher than private loan interest rates. Fixed interest rates/fixed APR gives a borrower peace of mind knowing that as time passes, their interest rates will not increase student loan payments over time.

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Interest Rates For Federal Plus And Perkins Loans

Both Federal PLUS and Perkins Loans are no longer available. They held the same rates until the end of their programs:

  • Federal PLUS Loan rate 8.5%
  • Perkins Loan rate 5%

Federal PLUS Loans were part of the FFEL Loan Program that ended in 2010. Perkins Loans were designed as a low-interest option for low-income undergraduate and graduate students and included a forgiveness program. These havent been available since 2017.

Key Terms In This Story

Student loan debt rising, with interest rates set to spike

Fixed interest: An interest rate that does not change during the life of a loan. All federal student loans have fixed interest rates, but private loans can offer fixed or variable interest rates. Fixed interest is the safer option because you dont have to worry about your rate and payment increasing.

Variable interest:Variable interest rates can change monthly or quarterly depending on the loan contract and come with rates caps as high as 25%. Variable interest loans are riskier than fixed interest loans, but can save you money if the timing is right.

Private student loan: Education funding from banks, credit unions and online lenders instead of the federal government. Private loans are best used to fill funding gaps after maxing out federal loans.

About the author:Anna Helhoski is a writer and NerdWallet’s authority on student loans. Her work has appeared in The Associated Press, The New York Times, The Washington Post and USA Today. Read more

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Federal Student Loan Origination Fee

Federal student loans are all charged an origination fee. This is a percentage of the total federal student loan that the lender charges to fund the loan. This origination fee is deducted from the total student loan amount prior to disbursement. Federal student loan origination fees are set every year on October 1 for loans disbursed from October 1 through September 30. Origination fees depend on which type of federal student loan has been approved for the student, as outlined below.

For loans disbursed from Oct. 1, 2021 to Sept. 30, 2022

Direct Subsidized or Direct Unsubsidized Loans for undergraduate students: 1.057%

Direct Unsubsidized Loans for graduate students: 1.057%

Direct PLUS : 4.228%

Canada Student Grants Program

The eligibility criteria for the Canada Student Grants Program are stringent, and not everyone who meets them is guaranteed the grant money. The reason why eligibility does not secure a grant is that the grant has a maximum amount of recipients to which the money can be awarded. Some grants may only select one individual, whilst other grants select several, and at times hundreds.

Grants typically assess your financial needs, in which case the amount would be dependent on your financial situation. While some grants may have a specific set amount given to one individual, other ones may allocate the total sum amongst multiple recipients. For people with disabilities or those who have dependables, like children, additional grants are offered for further assistance.

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Will This Affect My Private Student Loans

No, not directly. The new interest rates only apply to federal student loans.

However, it’s possible that private lenders will increase their rates in response to this news, because their rates don’t have to be as low to compete with federal rates now.

“I would shop around, not just be committed toward one loan provider or private versus federal loans,” says Mark Reyes, a certified financial planner with the personal-finance app Albert. Comparing lenders can help you find the best rate just know that private lenders don’t offer the same protections, such as student loan forgiveness through the government, that federal loans do.

Interest Rates For 2022

Average Interest Rate For Federal Student Loans

The federal student loan interest rate for the 2022-2023 school year is:

  • Undergraduate students 4.99%
  • Graduate students 6.54%
  • PLUS loans for students and parents 7.54%

Federal student loans are disbursed with what are known as grace periods, which vary in length depending on the kind of loan you have taken out.

Direct Unsubsidized Loans, Direct Subsidized Loans, Unsubsidized Federal Stafford Loans, and Subsidized Federal Stafford Loans all have a six-month grace period. This means that, upon graduation or falling below half-time student status, youll have six months before you have to begin repaying your student loans.

Meanwhile, PLUS loans, which both students and parents can apply for, have no grace period. Once you have received your first payout for this type of loan, youll need to begin repaying right away. PLUS and other loans can also include fees youll need to pay upfront, which vary on the size of the loan.

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Student Loan Refinance Rates

If you already have student loans and are looking for better rates, refinancing could be a good option for you. However, if you plan to refinance your federal student loans, first consider the benefits you would be giving up, including income-driven repayment plans and student loan forgiveness. Still, you can explore student loan refinance lenders to see what would make the most sense for your student loans.

Keep in mind that interest rates are largely determined by your credit score, which indicates your ability to pay back the loan. If your credit score is not very high, you won’t qualify for the lowest rates available and should consider working to improve your credit score before applying or using a cosigner. Below, we’ve listed some of the best student loan refinance lenders and their rates.

Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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