5 Unbeatable Tips to Find the Lowest Student Loan Interest Rates

student loan interest rates

With her bachelor’s, master’s, and MBA degrees, Noelle Randall has invested heavily in her education.

But all her learning has come at a price. To finance these degrees, Randall borrowed over $100,000 in student loans with interest rates ranging from 3.25% to 7.90%.

Randall is able to keep up with her monthly payments of $1,050, but every time she logs into her accounts, she sees something disheartening.

“Right now, about 50 percent goes to interest,” said Randall.

In other words, only half her monthly payment goes toward the principal, or the amount she originally borrowed. A whopping $525 goes toward the interest her debt has accrued.

Battling compounding loan interest is one of the toughest parts of having student debt. To save yourself money (and frustration), shop around for the lowest interest rate before you take out a loan.

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

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 2017-2018 school year, new Direct Loans have a fixed interest rate of 4.45%.

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 can get a better rate.

Then, you can choose the lender, federal or private, that offers you the 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 the right private student loan.

All you have to do is apply for a rate quote 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 pre-qualify 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 student loan interest rates will help you choose the lender that offers the best deal.

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.

For example, Citizens Bank offers fixed rates between 5.25% - 11.99%, but its variable rates are between 3.46% - 11.56%.

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 percent 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 percent “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

According to the Global Financial Excellence Literacy Center, over half of students took out a loan without having any idea what repayment would 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 offers.

With a student loan repayment calculator, you can see exactly how much you would need to 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 free online tools to gain a clear sense of the overall costs of your student loan.

Compare student loan interest rates to find the lowest one

Because student loan interest is always accruing, it can make it tough to pay off debt. Randall certainly learned this the hard way, since half of her monthly payments now go toward interest.

But one way to save yourself this financial headache is to find ways to lower your student loan interest rate. Shop around for the best terms, whether that’s a federal or private student loan.

Of course, 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.

Need a student loan?

Here are our top student loan lenders of 2018!
LenderRates (APR)Eligibility 

1 = Citizens Disclaimer.

2 = CollegeAve Autopay Disclaimer: The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
3.46% -
Undergraduate, Graduate, and ParentsVisit Citizens
2.93% -
Undergraduate, Graduate, and ParentsVisit CommonBond
3.79% -
Undergraduate, Graduate, and ParentsVisit CollegeAve
4.19% - 9.69%Undergraduate and GraduateVisit LendKey
3.35% - 10.89%Undergraduate and GraduateVisit Connext
3.25% - 11.85%Undergraduate and GraduateVisit SallieMae
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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Published in Financial Tips, Paying for College, Student Loans

  • nancyfarmer

    There should be a sixth strategy to help families n the future – save more for college to reduce the need to borrow, I am president of a consortium of nearly 300 private colleges and universities (Princeton to Stanford and everything in between) that voluntarily sponsor a prepaid tuition plan, Private College 529. It enables families to potentially save thousands of dollars by purchasing tomorrow’s tuition at today’s prices, reducing the need to borrow. Both 529 savings and prepaid plans offer tax breaks for families and even small, regular contributions to a 529 plan will add up over time. Bottom line: earn interest rather than pay it.