5 Pro Tips to Find the Lowest Student Loan Interest Rates For You

 March 31, 2021
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Private Student Loan rates starting at 0.99% APR

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1.13% to 11.23% 2
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0.99% to 11.44% 3
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One of the hardest things about paying off student loans is keeping up with interest charges. Depending on your interest rate, you could be spending far more to pay back your loan than you initially borrowed. That’s why it’s crucial to search for the lowest student loan interest rates you can get.

How to find the lowest student loan interest rates for you

Here are five ways to compare student loan interest rates to ensure you’re getting the lowest one you can:

1. Learn about your federal and private student loan options
2. Get an instant rate quote from multiple lenders
3. Decide between a fixed and variable interest rate
4. Ask about student loan interest discounts
5. Use a student loan calculator to estimate long-term costs

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1. Learn about your federal and private student loan options

When it comes to student loans, you have two options: You could borrow from the federal government or from a private lender, such as a bank, credit union or online lender.

Federal student loans are often a better option for students, since they come with flexible repayment plans and don’t require a cosigner. They also come with relatively low fixed interest rates, which remain the same over the life of the loan.

For the 2020-2021 school year, new Direct loans have a fixed interest rate of 2.75% for undergraduates and 4.30% for graduate students. Grad PLUS and parent PLUS Loans have a rate of 5.30%.

Private student loan interest rates, on the other hand, vary from lender to lender. Plus, those rates could be fixed — meaning they stay the same every month — or variable, meaning they change over time.

The rate you get ultimately depends on your creditworthiness as a borrower. If you don’t have strong enough credit, you’ll have to apply with a cosigner to qualify.

Federal student loans have more borrower protections than private ones, and they come with a variety of flexible repayment plans. But if your priority is to save money on interest, it could be worth shopping around with private lenders to see if you qualify for a better rate, particularly if you’re a graduate student or parent borrower.

Then, you can choose the lender, federal or private, that offers you your lowest interest rate on your student loan.

2. Get an instant rate quote from multiple lenders

If you’re a fan of online shopping, you know how to search different stores for the best deal. The same principle applies to finding private student loans with low interest rates.

All you have to do is prequalify for a rate from a lender. You’ll fill out basic personal information, such as your name, school and the amount you wish to borrow. Some lenders might also ask how much you pay in rent or make each month, along with your Social Security number.

After you provide this information, the lender will give you an instant rate quote. It will say if you prequalify for approval, plus it will offer some fixed and variable interest rates.

Keep in mind that these interest rates represent preliminary offers. They won’t be final until you submit an application and the lender runs a full credit check. But they offer a useful starting point for comparing your offers. You can see what rate you (or you and your cosigner) might get with each lender.

Note that this process applies to private student loans, not federal ones. To access federal student loans, all you have to do is submit the FAFSA.

But comparing all the rates will help you find private student loans with your lowest interest rates.

3. Decide between a fixed and variable interest rate

If you’re considering a private student loan, you’ll need to decide between a fixed and variable interest rate. Most lenders offer both — it’s up to you to decide which one is more beneficial.

Variable rates tend to start out lower than fixed ones, but they run the risk of increasing over time. If you’re going to pay your loan off fast, that risk might be worth the savings.

If you’re choosing a longer repayment period, a fixed rate could be the better option. That way, you won’t end up with a much higher interest rate than when you started.

4. Ask about student loan interest discounts

Once you’ve compared student loan offers, don’t forget to ask the lender one important question: Can I deduct student loan interest any further?

For example, most federal and private student loans allow you to earn an interest rate discount of 0.25% by setting up autopay.

Some private lenders also offer a lower student loan interest rate if you have an account with them. Citizens Bank, for instance, gives a 0.25% loyalty discount if you have a checking or savings account with them.

Even if you can’t get major discounts now, you could snag a lower rate in a few years if you refinance your debt. By refinancing your loans with a new lender, you could qualify for even lower student loan interest rates than the ones you have now.

But most lenders don’t let you refinance until you’ve graduated with your degree and built up a strong credit score and income. For now, factor in the autopay discount while keeping in mind that you could lower your rate through refinancing in the future.

5. Use a student loan calculator to estimate long-term costs

Unfortunately, some borrowers take out loans without having any idea what repayment will look like. Make sure you know exactly what to expect before signing any paperwork.

The math of compound interest is complicated, but fortunately you don’t have to know how to calculate student loan interest with a pencil and paper. Use a student loan repayment calculator to compare long-term costs.

With a student loan repayment calculator, you can see an estimate on how much you pay each month to pay off your loan in a certain number of years.

With a $30,000 loan at 5.70% interest, for example, you’d need to pay $329 per month to pay it off in 10 years. Want to see what it would take to pay off the loan even faster?

Enter a seven-year term instead of 10, and the calculator reveals your monthly payment would be $434. Plus, it shows you’d pay $2,975 less in interest.

Play around with these online tools to gain a clear sense of the overall costs of your student loan.

Comparing student loan interest rates to the lowest one for your situation

Because student loan interest is always accruing, it can make it tough to pay off debt. But the way to save yourself this financial headache is to learn how to get the lowest student loan interest rates. Shop around for your best terms, especially if you’re looking for low-rate private student loans.

And don’t forget about other considerations, such as student loan repayment plans and forgiveness programs. By weighing all the short- and long-term costs, you can find the right loan to finance your education.

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