Student loan interest rates vary among banks and other lending institutions. Federal student loan interest rates are fixed by the Federal Government and do not vary but there is a limit to the loan amount that a student or a student’s parent can get from the Federal Government loans. If a student or the student’s parents are seeking a private student loan then looking at the loan interest rates that are offered becomes extremely important. The present US government has taken a keen interest in the student loans program and has dropped the interest rates on government sponsored student loans. They are also cutting down the student loan interest rates and currently the US Federal Government has fixed the undergraduate Stafford loan interest rate which is currently at 6.8% will be cut in half over the next four years and will revert to 6.8% in 2012 unless the government decides to revise the interest rates then. The loan repayment terms have also been revised and this has also been done to redress the issues related to repayment of student loans. The Federal Government PLUS loans interest rate is fixed at 8.5%.

Those PLUS loans that were taken after 1st July 1998 and before June 30th 2006 had variable interest rates but did not exceed 9%. Another relieve in repayments is that students who go into public service will only need to do repayments for 10 years and those who are not in public service but are paying there student loans will not have to pay any remainder if the term exceeds 25 years. These measures that have been taken by announcing a cut in the interest rates on federal student loans is to encourage more students to utilize the government’s financial assistance programs. This is a major breakthrough for students who are seeking financial assistance and will have an impact on the lending rates of other financial institutions also.

There are different student loan interest rates that are offered by the private lending institutions and these vary with the prime rate. The prime rate as on August 29, 2007 was 8.25% and the lending institutions use the prime rate and offer loans based on the prime rate. Some lending institution charge a disbursement fee and a repayment fee where as others may not charge these. Current interest rates for student loans are offered at Prime rate – x% or Prime rate + x%. The x is the percentage that is either subtracted from the prime rate or is added to the prime rate. All repayment begins after a student has completed the studies this includes any extra time they will need to spend to complete their studies and a 6 month grace period is given before the repayments become due.

Student loan amount and rates are also dependent on the student’s credit scores and the better the credit scores the lesser will be the interest rate that is applied and will also help them in getting student loans. All private institutes’ student loans have a repayment period of 15 years.

Student loan consolidation interest rates have also been reduced on Federal Government sponsored student loans and in the private sector they vary from 4.75% to 6.125% depending on the lender.

Some financial institutions do offer low interest rate student loans and interest rates on student loans vary from lender to lender. Current interest rates for student loans also vary with the discipline in which a student is studying like MBA, or law or going through medical school and different lenders offer different interest rates on student loans.

The student’s credit scores and what field of studies they are pursuing is a major factor in determining the student loan interest rate that will apply to them.