If you’re like most student loan borrowers, your monthly payment eats up a significant amount of your paycheck. The average monthly student loan payment is $393.
But much of that monthly payment doesn’t help eliminate your debt. Instead, it pays off accrued interest.
In some cases, interest charges can even cause your loan balance to grow over time. This can happen if you’re on an income-driven repayment plan and you don’t have low-interest student loans.
As such, qualifying for a lower student loan interest rate can help you save money and become debt-free sooner.
How to score a lower student loan interest rate
Although you signed a contract with your lender agreeing to repay the loan at a particular interest rate, you’re not stuck with that rate forever. You can save money — and get rid of your student loans faster — by netting a lower student loan interest rate. Here are three ways to do it.
- Sign up for automatic payments
- Receive rate discounts by meeting other criteria
- Refinance your student loans with a private lender
1. Sign up for automatic payments
One of the easiest ways to lower your student loan interest rate is to enroll in automatic payments. Federal student loan servicers (and many private loan lenders) offer you a 0.25% discount on your interest rate if you allow them to automatically withdraw the minimum payment from your bank account each month.
If that 0.25% reduction doesn’t sound significant to you, do the math. If your $10,000 loan at 5.00% interest were reduced to 4.75% for the length of your loan, you’d pay back $12,582 in total.
That’s a savings of $146. It’s not a huge difference, but it’s still money back in your pocket.
Loan servicers don’t offer this benefit out of the goodness of their hearts. They do it as an incentive to get you to enroll in automatic payments, which reduces the risk of you falling behind on your payments. It’s also more convenient for you.
Enrolling in automatic payments is free and easy, and it’s even possible while you’re still in school. But you’ll need to stay on top of your finances to make sure enough money is in your bank account when the automatic payment is processed. Otherwise, you could get hit with overdraft penalties and fees.
To set up automatic payments, you can contact your loan servicer online or over the phone. You’ll need to provide them with your bank account number and routing number.
You can also usually choose a date each month for your lender to withdraw your payment. For example, if it’s easier to make your payments right after your paycheck arrives, you can set the withdraw date for the day after payday.
2. Receive rate discounts by meeting other criteria
Whether enrolling in autopay is right for your repayment or not, it’s not the only way to score a rate discount.
Here are a handful of other discount types offered by competitive lenders.
| Criteria | Rate discount | Lender |
|---|---|---|
| Opening a “loyalty” bank account with your lender | 0.25% | Citizens Bank |
| Being a repeat customer | 0.125% | SoFi |
| Submitting six straight on-time payments | 0.50% | MPower Financing |
| Submitting 36 straight prompt payments | 0.25% | SunTrust Bank |
Some lenders also offer cash bonuses or balance reductions for graduating, posting high marks in the classroom or referring a fellow borrower. Although these rewards won’t directly result in a lower student loan interest rate, they could help you make an extra — or extra-large — monthly payment. That would help you whittle down your interest charges, if only for a single month.
Examples of these lender offers include:
| Criteria | Reward | Lender |
|---|---|---|
| Earning a 3.0 grade point average | Cash reward¹ | Discover |
| Graduating your program | Cash equal to 1% of your loan amount | Ascent |
| Refer a refinancing customer | $400 | Laurel Road |
¹Get a cash reward on each new Discover undergraduate and graduate student loan when you earn at least a 3.0 GPA (or equivalent) in any academic period covered by the loan. Limitations Apply. Visit DiscoverStudentLoans.com/Reward for terms and conditions.
3. Refinance your student loans with a private lender
If you have high-interest federal or private education debt, refinancing can be a useful tool to get a lower student loan interest rate and save money. With refinancing, you work with a private lender to take out a new loan to repay some or all of your current debt with low-interest student loans.
The new loan is completely different from your old ones. It will have a new interest rate, monthly payment and repayment term.
If you have good credit, a steady income and a cosigner, you could qualify for the lowest rates that student loan refinancing companies have to offer. That makes refinancing one of the most cost-effective ways to net a lower student loan interest rate.
Here’s an example of the low-interest student loans for which you could qualify.
| Lender | Variable rates | Fixed rates |
|---|---|---|
| First Republic | Not available | 1.95% – 4.45% |
| SoFi | 2.31% – 7.36% | 3.46% -7.36% |
| Earnest | 1.99% -6.89% | 3.45% – 6.99% |
If you had a $10,000 loan at 5.00% interest and qualified for refinancing at 3.15% interest, you’d pay back $11,671 over 10 years. You’d save $1,057 by refinancing your student loan, compared with what you’d pay at 5.00% interest.
You could decrease your interest charges even further by choosing a variable rate over a fixed rate. Variable rates typically start lower but could creep up, as they hinge on greater market forces, making them a riskier proposition.
You might also receive a discounted rate by taking advantage of your professional association’s referral program. SoFi, for example, has offered rate discounts between 0.125% and 0.25% to members of the American Occupational Therapy Association and the American Academy of Family Physicians.
Any money saved via refinancing could go a long way to paying off your debt faster or help you pursue other goals, such as saving for retirement.
But refinancing isn’t for everyone. For one, you need to be employed, meet minimum income requirements and have a strong credit history. If you don’t have those things, you might be ineligible for refinancing unless you get a cosigner to act as a guarantor on the loan.
Even then, you might still need a cosigner to qualify for low-interest student loans.
Also, refinancing can be risky if you have federal loans. You’ll lose out on certain federal perks, such as access to income-driven repayment plans and federal forgiveness programs, so it’s important to weigh the benefits and drawbacks of refinancing before applying.
Accelerating your debt repayment
A lower student loan interest rate can help you save money. Refinancing your student loans or qualifying for an interest rate reduction could also make a big difference in your cash flow.
But if you don’t qualify for either option, don’t get discouraged. There are other ways to take charge of your loans and pay them off sooner.
Kat Tretina, Honey Smith and Andrew Pentis contributed to this article.
Interested in refinancing student loans?
Here are the top 9 lenders of 2021!| Lender | Variable APR | Eligible Degrees | |
|---|---|---|---|
 | 1.88% – 6.15%1 | Undergrad & Graduate | |
 | 1.88% – 5.64%2 | Undergrad & Graduate | |
 | 1.88% – 5.64%3 | Undergrad & Graduate | |
 | 2.50% – 6.85%4 | Undergrad & Graduate | |
 | 2.25% – 6.39%5 | Undergrad & Graduate | |
 | 1.90% – 5.25%6 | Undergrad & Graduate | |
 | 1.89% – 5.90%7 | Undergrad & Graduate | |
 | 2.39% – 6.01% | Undergrad & Graduate | |
 | 2.13% – 5.25%8 | Undergrad & Graduate | |
| Check out the testimonials and our in-depth reviews! 1 Important Disclosures for Splash Financial. Splash Financial DisclosuresTerms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice. To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit. Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2021. 2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest. Earnest DisclosuresInterest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.59% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions. Auto Pay Discount Disclosure You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. Student Loan Refinancing Loan Cost Examples These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product. Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America. © 2021 Earnest LLC. All rights reserved. 3 Important Disclosures for Navient. 4 Important Disclosures for CommonBond. CommonBond DisclosuresOffered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation. 5 Important Disclosures for SoFi. SoFi DisclosuresFixed rates from 2.74% APR to 6.74% APR (with autopay). Variable rates from 2.25% APR to 6.39% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 6 Important Disclosures for LendKey. LendKey DisclosuresRefinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution. Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810. As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay. 7 Important Disclosures for Laurel Road. Laurel Road DisclosuresAll credit products are subject to credit approval. Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com. As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount. Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate. Interest Rate: A simple annual rate that is applied to an unpaid balance. Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%. KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. This information is current as of April 29, 2021. Information and rates are subject to change without notice. 8 Important Disclosures for PenFed. PenFed DisclosuresAnnual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. |
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