7 Ways To Lower Your Student Loan Interest Rate

By Mentor Staff | Edited By Mentor Staff

Updated On September 9, 2022

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What is the best way to lower your student loan interest rate? It’s an important question that student loan borrowers ask so they can save money. If you’re like many student loan borrowers, your student loan payment costs you a lot of money each month. If you want to know how to reduce your student loan interest rate, the good news is that you have options.

Here are 7 ways to reduce your student loan interest rate:

  1. Refinance student loans
  2. Apply with a co-signer
  3. Choose a variable interest rate loan
  4. Choose a shorter student loan repayment term
  5. Have good credit
  6. Make on-time payments
  7. Sign up for auto pay

Top Picks For Student Loan Refinancing

October 2022

Variable APR ?APR, or Annual Percentage Rate, is the price you pay to borrow money. Variable APR means that your interest rate can fluctuate over time, which can increase or decrease your monthly student loan payment. Typically, a variable-rate loan has a lower introductory rate than a fixed-loan rate loan. Variable APR includes a 0.25% discount when you enroll in autopay.
Fixed APR ?APR, or Annual Percentage Rate, is the price you pay to borrow money. Fixed APR means that your interest rate will always stay the same. Even if interest rates change, your interest rate or monthly payment will not. Fixed APR includes a 0.25% discount when you enroll in autopay.
APR
3.40% - 8.40%
3.99% - 8.24%
3.40% - 8.40%

View Details

on SoFi's website

Overview

Variable APR:
3.40% - 8.40%
Fixed APR:
3.99% - 8.24%
Minimum Credit Score:
650
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000 ($10,000 in CA)

Details

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
2.49% - 7.99%
3.74% - 8.49%
2.49% - 8.49%

View Details

on Earnest's website

Overview

Variable APR:
2.49% - 7.99%
Fixed APR:
3.74% - 8.49%
Minimum Credit Score:
650
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5-20 years
Borrower Residency:
All States except NV
Hardship Deferment:
Yes
Co-signer Option:
No
2.49% - 7.99%
3.74% - 8.49%
2.49% - 8.49%

View Details

on NaviRefi's website

Overview

Variable APR:
2.49% - 7.99%
Fixed APR:
3.74% - 8.49%
Minimum Credit Score:
650
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,001 ($10,001 in CA)

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5-20 years
Borrower Residency:
All States except NV
Hardship Deferment:
Yes
Co-signer Option:
No
2.48% - 7.24%
4.29% - 7.29%
2.48% - 7.29%

View Details

on ELFI's website

Overview

Variable APR:
2.48% - 7.24%
Fixed APR:
4.29% - 7.29%
Minimum Credit Score:
680
Minimum Income:
$35,000
Fees:
None
Minimum Loan Amount:
$10,000

Details

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
2.49% - 11.72%
2.59% - 8.74%
2.49% - 11.72%

View Details

on Splash's website

Overview

Variable APR:
2.49% - 11.72%
Fixed APR:
2.59% - 8.74%
Minimum Credit Score:
640
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5 – 25 years
Borrower Residency:
All states
Hardship Deferment:
Varies
Co-signer Option:
No
3.99% - 11.07%
4.59% - 11.27%
3.99% - 11.27%

View Details

on Citizens' website

Overview

Variable APR:
3.99% - 11.07%
Fixed APR:
4.59% - 11.27%
Minimum Credit Score:
Not disclosed
Minimum Income:
$24,000
Fees:
No prepayment or origination fees
Minimum Loan Amount:
$10,000

Details

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
2.50% - 6.30%
3.99% - 6.40%
2.50% - 6.40%

View Details

on Laurel Road's website

Overview

Variable APR:
2.50% - 6.30%
Fixed APR:
3.99% - 6.40%
Minimum Credit Score:
660
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000

Details

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
4.13% - 7.39%
2.99% - 9.93%
2.99% - 9.93%

View Details

on LendKey's website

Overview

Variable APR:
4.13% - 7.39%
Fixed APR:
2.99% - 9.93%
Minimum Credit Score:
680
Minimum Income:
$24,000
Fees:
None
Minimum Loan Amount:
$5,000

Details

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
-
3.94% - 9.08%
3.94% - 9.08%

View Details

on ISL's website

Overview

Variable APR:
-
Fixed APR:
3.94% - 9.08%
Minimum Credit Score:
670
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000 ($10,000 in CA)

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All states, except OR and ME
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.

For example, let’s assume that you have $50,000 of student loans, a 7% interest rate and 10-year repayment plan. Your monthly student loan payment would be $581. The total repayment amount would be $69,665, which includes $19,665 in interest.

This student loan calculator shows you how to calculate your monthly student loan payment, including your total payment and total interest.

How to Get a Lower Interest Rate

If you have a high interest rate, your student loan payments can be expensive. The good news is that you don’t have to keep your student loan rate forever. You can lower your interest rate to save money and pay off student loans faster. Here’s how.

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.

To get approved for student loan refinancing, you’ll need good credit, stable and recurring income, and a low debt-to-income ratio. Student loan refinancing has no fees, so it’s free to apply and you can pay off your student loans early with no penalty.

At the same time, student loan refinance may not be right for you if you have federal student loans and plan to use certain benefits. For example, when you refinance student loans, you will no longer have access to certain federal benefits, such as income-driven repayment plans and federal student loan forgiveness programs. So, it’s important to weigh the advantages and disadvantages of student loan refinancing before you apply.

Let’s assume you have $40,000 of student loans, an 8% interest rate and a 10-year repayment term. Next, let’s assume you refinance student loans at a 3% interest rate and a 10-year repayment term. With student loan refinancing, you would save $99 each month and save $11,888 total.

This student loan refinance calculator shows you how much money you can save with student loan refinancing.

You can also compare lenders and check out the latest student loan refinancing rates.

Apply with a co-signer

If you have bad credit or don’t have enough income, you can apply with a qualified co-signer for a new loan or student loan refinancing. A co-signer can help you get approved for student loan refinancing and get a lower interest rate. Whether you choose a spouse, parent or other family member, a co-signer with strong credit and income is often the best choice. If you miss any payments or fail to pay off your student loan, your co-signer is also financially responsible.

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

If you have good credit, your chances to receive a lower interest rate are much better. Lenders view borrowers with good credit as financially responsible and more likely to repay student loans. The minimum credit score to be approved to refinance student loans is 650. However, many borrowers have a credit score above 700. If you want to know how to increase your credit score, it could help you get a lower interest rate.

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?

If you can’t lower your student loan interest rate, here are some other strategies to pay off student loans faster:

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.

For example, let’s assume you have $30,000 of student loans, a 7% interest rate and a 10-year repayment term. If you pay an extra $100 each month for your student loans, you would save $3,664 and pay off your student loans 2.84 years earlier.

This student loan payoff calculator shows you how much money you can save when you prepay your student loans.

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.

For example, let’s assume you have $50,000 of student loans, an 8% interest rate and a 10-year repayment term. If you make a one-time, lump-sum payment of $5,000, you would save $4,675 and pay off your student loans 16 months earlier.

This lump-sum student loan calculator shows you how much money you can save when you make a lump-sum payment on your student loans.

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.
  • Every month, pay the minimum payment for each student loan.
  • 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.
  • Focus on the student loan with the next highest interest rate, and repeat this process until all your student loans are paid off.

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