Loan Rates Compared: Personal vs Student Loans

How Federal Student Loan Rates Are Set

Federal student loan interest rates are determined by Congress and updated each academic year. The rate is fixed for the life of the loan, so it doesn’t change even if market interest rates rise or fall.

For loans first disbursed on or after July 1, 2026 and before July 1, 2027, the fixed rate for Direct Subsidized and Unsubsidized Loans for undergraduates is 6.52%. Direct Unsubsidized Loans for graduate and professional students carry a fixed rate of 8.07% for the same period, while Direct PLUS Loans (for parents and graduate or professional students) have a fixed rate of 9.07%.

These rates apply to all borrowers regardless of credit score—unlike private loans—because the federal government sets them based on a formula tied to the 10-year Treasury yield, with different margins added for undergraduate, graduate, and PLUS loans.

Sources: Federal Student Aid (U.S. Department of Education), BestColleges, Juno

How Private Student Loan Rates Work

Your rate is typically built by adding a margin to an underlying index rate, such as SOFR or LIBOR. Lenders often group credit scores into tiers, and a better credit score can qualify you for a lower margin. For example, a borrower with a strong credit profile might secure a rate lower than the current federal undergraduate rate, while a borrower with limited credit history may need a cosigner to get a competitive rate.

Sources: Savingforcollege.com, Bankrate, NerdWallet, The Wall Street Journal Buy Side

How Personal Loan Rates Are Determined

Personal loans are another category of credit you might consider for education or other expenses. Unlike federal student loans, personal loan APRs are not fixed by a government formula. Instead, they vary based on your credit score, income, and other factors.

As of August 2026, typical personal loan APRs ranged from about 6.24% to 35.99%. Lenders publish these ranges, but your actual rate will depend on your credit profile. Rates are generally higher than federal student loan rates because personal loans are unsecured and carry more risk to the lender.

Sources: Credible

Credit Score on Rates for Each Loan Type

Your credit score affects personal loans and private student loans, but it has little effect on federal student loans (with the exception of a credit check for PLUS loans).

Because federal student loans do not consider your credit history when setting rates, a borrower with poor credit pays the same rate as one with excellent credit. In contrast, private lenders use credit tiers and will offer lower margins—and lower rates—to borrowers with higher credit scores. Personal loans follow a similar pattern: a higher credit score generally leads to a lower APR.

Even for variable-rate private student loans, the margin added to the index is locked in when you take the loan—subsequent changes to your credit score won’t alter your rate. However, variable rates themselves will fluctuate as the underlying index changes.

Sources: University of Illinois Office of Student Financial Aid, Savingforcollege.com, Credible

Fixed vs. Variable Rates in Both Loan Categories

When you compare loan types, you’ll see two rate structures: fixed and variable. A fixed rate stays the same for the entire repayment period, while a variable rate can move up or down.

Federal student loans are always fixed. For the 2026–2027 academic year, the fixed rates are 6.52% for undergraduates, 8.07% for graduate or professional students, and 9.07% for PLUS loans.

Sources: Federal Student Aid (U.S. Department of Education), BestColleges, Bankrate, NerdWallet, Credible

Where to Find Current Official Rate Information

Because rates change, it’s important to rely on up-to-date sources. For federal student loans, the U.S. Department of Education’s Federal Student Aid website (studentaid.gov) publishes the official interest rates for each academic year. For private student loans, you can check individual lender rate disclosures or marketplace websites that aggregate current offers. For personal loans, lenders and comparison marketplaces provide sample rates, but your own rate will depend on your credit profile.

Sources: Federal Student Aid (U.S. Department of Education), BestColleges, Credible

How to Compare Rates Across Loan Types

When weighing personal loans against student loans, comparing the nominal interest rates alone is not enough. You should also consider the annual percentage rate (APR), which includes fees and reflects the true cost of borrowing. Federal student loans do not have origination fees for Direct Subsidized and Unsubsidized loans, while private loans may charge fees. Personal loans often have origination fees as well.

Another key comparison is the total interest you would pay over a typical repayment term. You can use a loan calculator to run such scenarios, but you must input the APR (not just the nominal rate) and the exact term to get an accurate total.

Borrower protections also matter. Federal student loans offer deferment, forbearance, and income-driven repayment options that are generally not available with private student loans or personal loans. Private student loans may have lower advertised rates for excellent credit, but they lack the flexible repayment programs of federal loans. Personal loans typically require payments to begin within 30 days and do not offer those protections.

Sources: University of Illinois Office of Student Financial Aid, Broadview Federal Credit Union

Side-by-side category

The table below summarizes the key rate-related features for each loan category based on the evidence we have. Note that advertised private loan rates are indicative and may not match every lender’s offer.

Sources: Federal Student Aid (U.S. Department of Education), BestColleges, University of Illinois Office of Student Financial Aid, Bankrate, NerdWallet, The Wall Street Journal Buy Side, Credible