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How to Find the Lowest Student Loan Interest Rates for You
Updated On September 12, 2022
Editorial Note: This content is based solely on the author's opinions and is not provided, approved, endorsed or reviewed by any financial institution or partner.
Student loan repayment is not only about paying off your original student loan balance, but also about paying off student loan interest. That’s why it’s critical to know how to find the lowest student loan interest rates for you. Otherwise, you could be overpaying for your student loans, which nobody wants to do.
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April 2024
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- Student loans available to graduate, bachelors and associates degrees
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- Grace period for undergraduates: 6 months
- Grace period for graduate students: 9 months
- Flexible student loan repayment options
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- Low rates from community lenders like credit unions and community banks
- Get lower rates with a co-signer
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- If you repay 10% of your loan before your loan enters full repayment period, 1.0% APR is dropped from your current interest rate
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- Offer student loans for undergraduates, career training, and graduate students.
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- Student loans for college, graduate, medical/dental, law, MBA and Parent Loans
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- Student loan repayment while in school
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Here are 6 ways to find the lowest student loan interest rates for you:
- Learn about federal student loans
- Learn about private student loans
- Use a student loan calculator
- Choose a fixed or variable interest rate
- Enroll in autopay to get a lower interest rate
- Refinance student loans
Learn about federal student loans
When it comes to borrowing student loans, you have two choices: federal student loans and private loans. First, you should learn about federal student loans. Federal student loans are available through the U.S. Department of Education.
Federal student loans have several key advantages:
- First, federal student loans come with a fixed interest rate, so your interest rate will never change over the life of your student loan.
- Second, federal student loans don’t require a cosigner.
- Third, federal student loans have many different student loan repayment options.
- Fourth, federal student loans come with several benefits, including forbearance, deferment, income-driven repayment and student loan forgiveness.
- Fifth, the federal government doesn’t underwrite student loans, meaning that every federal student loan borrower gets the same interest rate for their federal student loans regardless of their underlying credit profile. That said, if you have a strong credit profile, you may be overpaying for your interest rate if you have a federal student loan. Generally, if these benefits are important to you, you should maximize the amount of your federal student loans before borrowing private student loans.
To apply for federal student loans, you should complete the Free Application for Federal Student Aid (FAFSA).
Learn about private student loans
Private student loans are available through private lenders. For private student loans, you can compare the latest rates and lenders to find the lowest student loan interest rates for you. Typically, private student loans have a lower interest rate than federal student loans. So, if you are focused on getting a lower interest rate, you may want to consider private student loans. If you have strong credit and income, or a cosigner with strong credit and income, you may qualify for a lower interest rate with a private student loan. That said, private student loans don’t have the same benefits as federal student loans, such as income-driven repayment plans or student loan forgiveness. That said, some private lenders may offer forbearance, deferment or other flexible student loan repayment option. Check with each lender for details.
You can apply for private student loans directly with lenders:
- First, you should compare lenders to find the best lender for you.
- Second, compare interest rates and student loan terms.
- Third, you can check your new interest rate with each lender for free with no impact to your credit score. This is called a soft credit check and usually takes a few minutes.
- Fourth, you can apply to multiple lenders to maximize your chances of approval and to find the lowest student loan interest rate for you. Once you apply, the lender will check your credit. If you apply to multiple lenders in a short time frame, this typically counts as only one credit inquiry on your credit report.
- Fifth, once you’re approved, choose the lowest interest rate and best student loan lender for you.
Use a student loan calculator
It’s smart to use a student loan calculator to calculate how much your student loans will cost.
This monthly student loan payment calculator shows you how much your monthly payment and total payment will be for your student loans.
According to the monthly student loan payment calculator, for student loans with a balance of $75,000 with a 7% average interest rate and a loan term of 10 years, your total monthly payment would be $871. The total repayment amount would be $104,498 (which includes $29,498 in interest).
This student loan payoff calculator shows you how much money you can save when you pay off student loans faster.
For example, let’s assume that you have $75,000 of student loans with a 7% interest rate and a monthly student loan payment of $871. Now, let’s assume that you pay an extra $100 each month. If you pay an extra $100 each month (for a total of $971 per month), you could pay off your student loans 1.42 years earlier and save $4,509.
Choose a fixed or variable interest rate
While federal student loans only have a fixed interest rate, private student loans are available with a fixed interest rate or a variable interest rate. Your interest rate will determine how much interest you pay on your student loans. If you borrow a private student loan, you can therefore choose a fixed or variable interest rate. A fixed interest rate means that your student loan interest rate won’t change over the life of your student loan. In contrast, a variable interest student loan means that your student loan interest rate can increase or decrease over the life of your student loan. Variable interest rates are typically lower than fixed interest rates. That said, if you expect interest rates to increase, a fixed interest rate may be advantageous so that your interest rate stays the same and doesn’t increase. In contrast, if you expect interest rates to decrease, you may prefer a variable interest rate so that your student loan interest rate falls when underlying interest rates are lowered.
Enroll in autopay to get a lower interest rate
There are many ways to get a lower interest rate. One strategy to get a lower interest rate is to enroll in autopay. This is available with most private lenders and involves linking your student loan account with your bank account. Then, each month, your student loan servicer will automatically withdraw your student loan payment each month. When you sign up for autopay, most private lenders will discount your interest rate by 0.25%.
Refinance student loans
Student loan refinancing is another way to find the lowest student loan interest rates for you. (You may be wondering: Is student loan refinancing worth it?). Student loan refinancing is the process of combining your federal student loans, private student loans, or both, into a new private student loan with a lower interest rate. Your new student loan is used to pay off your old student loans, and your new student loan can help you save money and pay off student loans faster. How can you get a lower interest rate with student loan refinancing? You should refinance student loans whenever you can qualify for a lower interest rate. There are no origination fees, application fees or prepayment fees when you refinance, and there is no limit to the number of times that you can refinance. Lenders may evaluate your credit, income, debt-to-income ratio, monthly cash flow and other factors to offer you a lower interest rate.
This student loan refinancing calculator can show you how much money you can save with a lower interest rate when you refinance student loans.
For example, let’s assume that you have $80,000 of student loans with a 7% interest rate and 10-year repayment term. If you refinance $80,000 of student loans at a 3% interest rate with a 10-year repayment term, you can save $156 each month and $18,766 over the life of your student loan.
Refinance With SoFi
