Student loans issued by the federal government carry fixed interest rates of up to 6.8% annually. This rate far exceeds many mortgage and personal loan interest rates. The initial interest rate on all federal student loans should not exceed the prime interest rate, with scheduled reductions in interest for establishing and maintaining an on-time payment history.
I owe $70,000 in student loans and I am on income-based repayment. Even though I make my payment on time each month, my balance goes up by $100 due to my interest rate of 6.8%.
The Wall Street Journal prime interest rate as of this writing is 3.25%, and the Federal Funds Rate, the interest rate that banks charge each other to borrow money, is currently 0.25%. (bankrate.com)