5 pro tips for finding the lowest student loan interest rates for you

Note that the student loan situation has changed due to the impact of the coronavirus outbreak and the relief efforts of the government, student loan lenders and others. Check out our Student Loans Hero Coronavirus Information Center for news and additional details.

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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 a lot more to pay off your loan than you originally borrowed. This is why it is crucial to seek the lowest student loan interest rates that 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 make sure you’re getting as low as possible:

1. Learn About Your Federal and Private Student Loan Options
2. Get instant quotes from multiple lenders
3. Decide between a fixed and variable interest rate
4. Find out about interest reductions on student loans
5. Use a student loan calculator to estimate long-term costs

1. Learn About Your Federal and Private Student Loan Options

When it comes to student loans, you have two options: you can 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 because they come with flexible repayment plans and don’t require a co-signer. They also come with relatively low fixed interest rates, which stay the same throughout the life of the loan.

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

In contrast, the interest rates for private student loans vary from lender to lender. Plus, these rates can 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 enough credit, you’ll need to apply with a co-signer to qualify.

Federal student loans offer more protection to borrowers than private loans, and they come with a variety of flexible repayment plans. But if saving money on interest is your priority, it might be worth shopping around for private lenders to see if you qualify for a better rate, especially if you’re a graduate student or a parent. borrower.

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

2. Get instant quotes from multiple lenders

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

All you gotta do is prequalify for a rate from a lender. You’ll fill in some basic personal information, such as your name, school, and how much you want to borrow. Some lenders may also ask you how much you pay in rent or earn each month, along with your Social Security number.

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

Keep in mind that these interest rates represent preliminary offers. They will not be final until you submit an application and the lender performs a full credit check. But they do offer a useful starting point for comparing your offers. You can see what rate you (or you and your co-signer) could get with each lender.

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

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

3. Decide between a fixed and variable interest rate

If you are considering a private student loan, you will need to choose between a fixed and variable interest rate. Most lenders offer both – it’s up to you which one is more beneficial.

Variable rates tend to start off lower than fixed rates, but they are likely to increase over time. If you’re going to pay off your loan quickly, that risk could be worth the savings.

If you choose a longer repayment period, a fixed rate might be the best option. This way, you won’t end up with a much higher interest rate than at the beginning.

4. Find out about interest reductions on student loans

After you’ve compared student loan offers, remember to ask the lender an important question: Can I deduct more interest from the student loan?

For example, most federal and private student loans allow you to earn a 0.25% interest rate discount by setting up automatic payment.

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

Even if you can’t get big discounts now, you could get a lower rate in a few years if you refinance your debt. By refinancing your loans with a new lender, you may be eligible for even lower student loan interest rates than you currently have.

But most lenders won’t allow you to refinance until you’ve graduated and built up a solid credit rating and a solid income. For now, consider the automatic payment discount, but be aware that you may reduce 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 knowing what the repayment will look like. Make sure you know exactly what to expect before signing any documents.

Calculating compound interest is complicated, but luckily you don’t need to know how to calculate student loan interest with 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 of how much you are paying each month to pay off your loan over a number of years.

With a loan of $ 30,000 at 5.70% interest, for example, you will have 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 that your monthly payment would be $ 434. Plus, it shows that you would pay $ 2,975 less in interest.

Play around with these online tools to get a clear idea of ​​the overall costs of your student loan.

Compare the lowest student loan interest rates for your situation

Since student loan interest always accumulates, it can be difficult to pay off debt. But the way to save yourself this financial headache is to learn how to get the lowest interest rates for student loans. Look for your best terms, especially if you are 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.