When it comes to student loans, not all loans are created equal.
Loans can vary when it comes to interest rates, length of repayment, and payment options. The good news is that whether you’re taking out a new loan to pay for school or you want to refinance your current student loans, the process for finding the best rates is the same.
Choosing the best lender and student loan rates can save you hundreds or even thousands of dollars. Here are five steps that can help you find the best student loan rates and what you should consider before applying for a loan.
1. Shop around
When looking for a lender and a loan, make sure you compare several different companies. Comparison shopping can ensure you get the best terms that work for you and your budget.
But shopping around on your own can be overwhelming and confusing. That’s why it makes sense to use resources where you can compare a bunch of different lenders at once.
Our lender snapshot can show you crucial information all in one spot, like interest ranges, the length of repayment, and more.
2. Consider both fixed and variable student loan rates
When you’re comparing interest rates, make sure to think carefully about whether to go with a fixed interest rate or a variable rate.
With a variable rate, the lender gives you a lower rate at the beginning of your loan. Though that might be a great deal, a variable rate loan can change over time with the market. It can increase dramatically over your repayment term. This can also affect your monthly payment amount.
While a fixed interest rate is often higher than a variable rate, the interest rate is set for the duration of the loan and never changes. With a fixed rate loan, you have peace of mind, knowing that your loan payments will never change.
Your financial situation and goals affect which option makes the most sense for you. If you plan on paying off your debt aggressively, a variable rate can help you do that and save money. But if you think you’ll need five or more years to manage your debt, a fixed rate loan might be a safer option.
3. Compare repayment options
When looking for the best student loan rates, keep in mind that the length of repayment can affect your rate. In general, the shorter the repayment term, the lower your interest rate.
For example, if you take out a loan with a five-year term, you may have an interest rate around 4%. However, if you opt for a 20-year repayment term instead, your interest rate can be as high as 8%.
Extending the repayment term can reduce your monthly payment, giving you more room in your budget right now. But selecting the longer period can cost you thousands more over time.
You can compare the total cost of your loans and how it affects your payments by using this monthly payment calculator:
Student Loan Payment Calculator
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4. Look out for special incentives
Some lenders offer payment incentives that can further reduce your interest rate. For example, SoFi offers a 0.25% discount off your student loan or student loan refinancing rates when you sign up for automatic payments. Other lenders offer a discount when you’ve made a certain number of on-time payments.
And while 0.25% may not sound like much, it can save you a lot of money over time. For example, if you had a $35,000 loan at 5.7% interest and a 10-year repayment term, you would pay $10,998 in added interest.
But if signed up for automatic payments and got the 0.25% discount, your interest rate would drop to 5.45%. You would end up paying $10,477 in interest, saving over $500.
Lender incentives can help you get an even better rate, saving you money over the long-term.
5. Minimize the impact on your credit score
When looking at lenders, it’s important to minimize the impact on your credit score. Maintaining good credit can help you get more competitive rates. Plus, shopping carefully can ensure you can get approved for other forms of credit too, such as credit cards, auto loans, or a mortgage.
Before you apply, check to see if the lender does a soft credit check or a hard credit inquiry. A hard inquiry is when a lender checks your background to make a decision on whether or not to give you a loan. A hard credit inquiry can lower your score and stay on your credit report for up to two years.
Soft inquiries are a background check of your credit report, but do not affect your credit in any way and do not stay on your credit history. Many companies will make a soft inquiry to give you a rate quote and will process a hard inquiry only when you’re ready to proceed with a loan.
If you’re worried about your credit, apply with lenders who only do a soft inquiry first to get rate quotes. But try to complete offers within 30 days. That approach will lessen the hit to your credit. You can also limit the effect on your credit by checking lenders’ requirements before you apply.
Finding the best student loan rates
Finding the best student loan rates can be overwhelming — but have no fear. There are tools available to help you get the most competitive deals.
You can compare private student loans and review the best student loan refinancing companies on Student Loan Hero.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB) or Turnstile Capital Management, LLC (TCM), which are not affiliated entities. Certain restrictions and limitations may apply. Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. All loan products may not be available in certain jurisdictions. Other terms and conditions apply. Ascent is a federally registered trademark of TCM and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.69% – 10.94%1||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|3.82% – 12.82%3||Undergraduate and Graduate||Visit Ascent|
|4.34% – 12.99%2||Undergraduate and Graduate||Visit Discover|
|4.12% – 10.98%*,4||Undergraduate and Graduate||Visit SallieMae|
|5.03% – 11.23%5||Undergraduate and Graduate||Visit PNC|
|3.88% – 12.88%6||Undergraduate and Graduate||Visit SunTrust|
|4.72% – 9.81%7||Undergraduate and Graduate||Visit LendKey|
|3.72% – 9.68%8||Undergraduate, Graduate, and Parents||Visit CommonBond|
|4.04% – 12.01%9||Undergraduate, Graduate, and Parents||Visit Citizens|