<P> Federal student loan interest rates are set by Congress, and fixed . Private student loans usually have substantially higher interest rates, and the rates fluctuate depending on the financial markets . Some private loans disguise the true cost of borrowing by requiring substantial up - front origination "fees", which enable deceptively lower interest rates to be offered . Interest rates also vary depending on the applicant's credit history . </P> <P> Most private loan programs are tied to one or more financial indexes, such as the Wall Street Journal Prime rate or the BBA LIBOR rate, plus an overhead charge . Because private loans are based on the credit history of the applicant, the overhead charge varies . Students and families with excellent credit generally receive lower rates and smaller loan origination fees than those with poorer credit histories . Money paid toward interest is now tax deductible . However, lenders rarely give complete details of the terms of the private student loan until after the student submits an application, in part because this helps prevent comparisons based on cost . For example, many lenders only advertise the lowest interest rate they charge (for good credit borrowers). Borrowers with bad credit can expect interest rates that are as much as 6% higher, loan fees that are as much as 9% higher, and loan limits that are two - thirds lower than the advertised figures . </P> <P> Private loans often carry an origination fee, which can be substantial . Origination fees are a one - time charge based on the amount of the loan . They can be taken out of the total loan amount or added on top of the total loan amount, often at the borrower's preference . Some lenders offer low - interest, 0 - fee loans . Each percentage point on the front - end fee gets paid once, while each percentage point on the interest rate is calculated and paid throughout the life of the loan . Some have suggested that this makes the interest rate more critical than the origination fee . The amount that is borrowed from private lenders accumulates to about 15 billion borrowed from private loans . </P> <P> In fact, there is an easy solution to the fee - vs. - rate question: All lenders are legally required to provide you a statement of the "APR (Annual Percentage Rate)" for the loan before you sign a promissory note and commit to it . Unlike the "base" rate, this rate includes any fees charged and can be thought of as the "effective" interest rate including actual interest, fees, etc . When comparing loans, it may be easier to compare APR rather than "rate" to ensure an apples - to - apples comparison . APR is the best yardstick to compare loans that have the same repayment term; however, if the repayment terms are different, APR becomes a less - perfect comparison tool . With different term loans, consumers often look to "total financing costs" to understand their financing options . </P>

When did the government start subsidizing student loans