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Federal student loan interest rates start at 4.45% for the 2017-2018 school year. If your student loan rates are higher than that, there’s not a lot you can do about it while you’re in school.
But you’re not entirely without options. Here are some steps you can take to get better student loan rates in the future.
3 steps to take if your student loan rates aren’t the best
If you want to get on the right track with your student loan rates, it’s important that you understand how your rates stack up, prepare to get better rates the next time you apply, and start looking into your post-graduation options.
1. Know where you stand
To get an idea of whether your rates are high, it’s important to compare them with average student loan rates.
For example, if you have federal student loans, your rates are among the lowest you can get. Private student loan rates can vary by lender, but you can look at some of the top private student loan companies to see what rates they offer.
If you find that your student loan rates are reasonable, or even low, then you might not need to do anything else. If, however, your rates are high, you might want to start looking at some other options, especially if you plan to borrow again before you graduate. Keep in mind that some options, including private student loans, require a credit check.
2. Use a cosigner next time
You don’t need a cosigner for federal student loans. But if you applied for private student loans and got a high rate, a cosigner might be able to help you do better next time.
Pick someone who has a great credit history and solid income. Lenders consider both factors when determining your interest rate.
Getting a cosigner can be tough, though. You’re asking someone to take on the responsibility of paying off the debt if you miss payments or default. The loan also will show up on their credit report, potentially making it difficult for them to borrow in the future.
To make it easier, consider student loan companies that offer cosigner release. This feature allows you to apply to have your cosigner removed from the loan after two to four years of on-time payments. It’s not guaranteed, though. You’ll need to have good enough credit and income to continue repayment on the loan in your name only.
Opting for a student loan with cosigner release can alleviate some of the concerns a potential cosigner might have about making such a long-term commitment.
3. Start looking at refinancing opportunities
If you’re close to graduating, you’ll soon have an opportunity to potentially refinance your student loans with a lower interest rate.
Some of the best student loan refinancing companies offer low variable and fixed interest rates. But if you’re thinking of refinancing federal loans, take these facts into consideration:
- You’ll lose access to Public Service Loan Forgiveness.
- You won’t be able to take advantage of income-driven repayment plans.
- You might not get a lower interest rate than what the Department of Education offers.
Check to see if you can get a cosigner. The right cosigner can improve your chances of getting a lower interest rate when you refinance.
As you’re looking at different terms student loan refinancing companies offer, don’t look at just the interest rate. Consider what your new monthly payment would be. Even if you nab a low interest rate, you might regret refinancing if your monthly payment becomes unaffordable.
Avoid procrastinating and save money
The longer you take to address high interest rates, the more money you’ll end up paying in interest. This is especially the case for private student loans and Direct Unsubsidized Loans through the federal government. These loans start accruing interest as soon as they’re disbursed.
Even if you don’t plan to take action anytime soon, start thinking about your options and what you’re going to do. That way, you’ll be ready when the time comes to make a decision.
Need a student loan?Here are our top student loan lenders of 2018!
1 = Citizens Disclaimer.
2 = CollegeAve Autopay Disclaimer: All rates shown include the auto-pay discount. 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.
* 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.
3 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
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