Here are 7 ways to reduce your student loan interest rate:
Compare The Best Student Loan Refinance Rates For 2020
Overview
| Key | Value |
|---|---|
| Variable Rates: | 2.26% – 6.29% |
| Fixed Rates: | 2.99% – 6.28% |
| Minimum Credit Score: | 650 |
| Minimum Income: | None |
| Fees: | None |
| Minimum Loan Amount: | $5,000 ($10,000 in CA) |
Details
| Key | Value |
|---|---|
| Eligible Loans: | Private & Federal |
| Eligible Degrees: | Undergraduate & Graduate |
| Loan Terms: | 5, 7, 10, 15, 20 years |
| Borrower Residency: | All states |
| Hardship Deferment: | Yes |
| Co-signer Option: | Yes |
Overview
| Key | Value |
|---|---|
| Variable Rates: | 1.99% – 5.34% |
| Fixed Rates: | 2.98% – 5.49% |
| Minimum Credit Score: | 650 |
| Minimum Income: | None |
| Fees: | None |
| Minimum Loan Amount: | $5,000 |
Details
| Key | Value |
|---|---|
| Eligible Loans: | Private & Federal |
| Eligible Degrees: | Undergraduate & Graduate |
| Loan Terms: | 5-20 years |
| Borrower Residency: | All States except KY or NV |
| Hardship Deferment: | Yes |
| Co-signer Option: | No |
Overview
| Key | Value |
|---|---|
| Variable Rates: | 2.39% – 6.01% |
| Fixed Rates: | 2.79% – 5.99% |
| Minimum Credit Score: | 680 |
| Minimum Income: | $35,000 |
| Fees: | None |
| Minimum Loan Amount: | $15,000 |
Details
| Key | Value |
|---|---|
| Eligible Loans: | Private & Federal |
| Eligible Degrees: | Undergraduate & Graduate |
| Loan Terms: | 5, 7, 10, 15, 20 years |
| Borrower Residency: | All States |
| Hardship Deferment: | Yes |
| Co-signer Option: | Yes |
Overview
| Key | Value |
|---|---|
| Variable Rates: | 1.89% – 6.66% |
| Fixed Rates: | 2.63% – 6.63% |
| Minimum Credit Score: | 660 |
| Minimum Income: | None |
| Fees: | None |
| Minimum Loan Amount: | $5,000 |
Details
| Key | Value |
|---|---|
| Eligible Loans: | Private & Federal |
| Eligible Degrees: | Undergraduate & Graduate |
| Loan Terms: | 5 – 20 years |
| Borrower Residency: | All states |
| Hardship Deferment: | Varies |
| Co-signer Option: | Yes |
Overview
| Key | Value |
|---|---|
| Variable Rates: | 1.89% – 5.90% |
| Fixed Rates: | 2.80% – 6.00% |
| Minimum Credit Score: | 700 |
| Minimum Income: | None |
| Fees: | None |
| Minimum Loan Amount: | $5,000 |
Details
| Key | Value |
|---|---|
| Eligible Loans: | Private & Federal |
| Eligible Degrees: | Undergraduate & Graduate |
| Loan Terms: | 5, 7, 10, 15, 20 years |
| Borrower Residency: | All States |
| Hardship Deferment: | Yes |
| Co-signer Option: | Yes |
Overview
| Key | Value |
|---|---|
| Overall Rate: | 1.95% – 3.85% |
| Variable Rates: | – |
| Fixed Rates: | 1.95% – 3.85% |
| Minimum Credit Score: | None |
| Minimum Income: | None |
| Fees: | None |
| Minimum Loan Amount: | $25,000 |
Details
| Key | Value |
|---|---|
| Eligible Loans: | Private & Federal |
| Eligible Degrees: | Undergraduate & Graduate |
| Loan Terms: | 5, 7, 10, 15 years |
| Borrower Residency: | Must live near a branch in California; New York City; Boston; Greenwich, Connecticut; Palm Beach, Florida; Portland, Oregon; or Jackson, Wyoming |
| Hardship Deferment: | No |
| Co-signer Option: | Yes |
Overview
| Key | Value |
|---|---|
| Variable Rates: | 1.97% – 8.54% |
| Fixed Rates: | 2.99% – 8.77% |
| Minimum Credit Score: | 680 |
| Minimum Income: | $24,000 |
| Fees: | None |
| Minimum Loan Amount: | $5,000 |
Details
| Key | Value |
|---|---|
| Eligible Loans: | Private & Federal |
| Eligible Degrees: | Undergraduate & Graduate |
| Loan Terms: | 5, 7, 10, 15, 20 years |
| Borrower Residency: | All states, except ME, ND, NV, RI, WV |
| Hardship Deferment: | Yes |
| Co-signer Option: | Yes |
How Student Loan Interest Works
When you borrow a student loan, you agree to repay the amount of the student loan, plus interest. Your interest rate is a charge that you pay your lender to borrow your student loan. Each month, you are charged a portion of the principal balance (the amount of you borrowed), plus an interest payment, which is equal to the interest rate multiplied by the outstanding principal balance. Based on your student loan repayment term, you will pay off your student loans, including interest, at the end of your repayment term.
How to get a lower interest rate
Refinance student loans
The best way to lower your interest rate is to refinance student loans. Student loan refinancing means exchanging your current student loans for a new student loan with a lower interest rate. You can lower your high interest rate for your federal student loans, private student loans or both. When you refinance student loans, you receive a new private loan with a lower interest rate, monthly payment and student loan repayment term.
You can also compare lenders and check out the latest student loan refinancing rates.
Apply with a co-signer
Choose a variable interest rate loan
A variable interest rate loan can help you get a lower interest rate. Why? Variable interest rate loans typically have a lower interest rate than fixed interest rate loans. When you refinance student loans, you can choose either a fixed interest rate or variable interest rate. A fixed interest rate means that your interest rate will stay the same during your student loan repayment term. In contrast, a variable interest rate can increase or decrease during your repayment term.
Choose a shorter student loan repayment term
You can also lower your interest rate by choosing a shorter student loan repayment term. When you refinance student loans, you can choose a repayment term from 5 to 20 years. A 5-year repayment term has a lower interest rate than a 20-year repayment term. A lower interest rate means you will pay less interest during your student loan repayment term. However, a shorter repayment term also means that your student loan payment each month may increase.
Have good credit
Make on-time payments
If you want to increase your credit score, make on-time payments. Your payment history is one of the most important factors in your credit score. Make sure not to skip any payments and make payments on time. Some lenders may even offer an interest rate discount if you pay on time.
Sign up for auto pay
Some lenders offer an interest rate reduction of 0.25% when you enroll in auto pay. Over time, this interest rate discount can help you save money on your student loans. When you sign up for auto pay, your payments will be automatically deducted each month from your bank account. Automatic payments help ensure that you never have late payments or miss a payment.
What if you can't lower your student loan interest rate?
Make an extra student loan payment
The good news about student loans is there is no prepayment penalty. That means you can pay off student loans any time without any fees. To save money on your student loans, you can make an extra student loan payment.
Make a lump-sum student loan payment
Another strategy to pay off student loans faster is to make a lump-sum student loan payment. Rather than increase your student loan payment each month, you can make a one-time payment. The one-time payment can be applied to your principal student loan balance, which can help you save money.
Avoid income-driven repayment plans
An income-driven repayment plan is a federal student loan repayment plan that bases your monthly student loan payment on your income, family size and other factors. Some borrowers choose an income-driven repayment plan to reduce their monthly federal student loan payment. In some cases, your monthly payment may be as low as $0 each month. However, interest still accrues on your federal student loan balance. As a result, your federal student loans may become more expensive and can take longer to repay. If you want to pay off student loans faster, you may want to avoid income-driven repayment plans.
Pay off high interest debt first
Many borrowers are paying off multiple student loans with different interest rates. Which student loans should you pay off first? Here’s what you should do. List your existing student loans, remaining balances, interest rates and monthly payments. First, every month, pay the minimum payment for each student loan. Second, apply any extra money toward the student loan with the highest interest rate. Repeat this process each month until you pay off the student loan with the highest interest rate. Third, focus on the student loan with the next highest interest rate, and repeat this process until all your student loans are paid off. This strategy will help you save more money on your student loans.
