What you need to know when looking at interest rates on student loans

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Here’s how to get the best student loan refinancing rates. (iStock)

Getting top speed is critical when taking off student loan – but this can often seem overwhelming or even completely impossible. How do you know which tariff to choose? More importantly, how can the rates received from lenders be reduced?

Understanding what goes into student loan rates can help you make the right decision. Learn more about student loan interest rates in the analysis below and visit Credible to compare individual loan interest rates from multiple student loan lenders at the same time.

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How are student loan interest rates determined

The government sets federal student loan rates based on the yield on 10-year Treasuries and other factors. They are the same for all borrowers across the board.

Private student loan rates, on the other hand, differ much more widely. Each lender sets their own rates based on their index, such as the underlying lending rate. From there, borrowers are cited based on their credit rating and other factors.

“Interest rates on private student loans depend on several different factors, some of which are in your control and some you are not,” says Howard Dworkin, a certified public accountant and chairman of Debt.com. “Depending on the lender, your credit rating and market trends can affect your rate.”

Would you like to know what rates you are applying for? Use an online tool like Credible compare student loan rates without affecting your credit score.

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Things to Consider When Comparing Interest Rates

There are several things you should consider when considering student loan offers, not just how low or how high the rate is.

The first is a fixed or variable interest rate. In the case of a variable interest rate loan, your interest rate can change monthly, quarterly, or annually, while changing your payment at the same time.

“Beware of variable interest rates and instead try to lock in a fixed interest rate,” said Ilian Georgiev, CEO and co-founder of the debt management app Charlie. “Variable interest rates that are associated with things like Fed rate – will seem like a cheaper deal now, but keep in mind that as the Fed raises interest rates – which it almost certainly will – your monthly payments will rise. So what looks available today may not be available in a year. “

The monthly payment and the loan term or maturity should also play a role in your decision.

“When considering two or more student loans, the borrower must compare the monthly loan payment and the total loan payments, especially if the two loans have different repayment terms,” says Mark Kantrowitz, publisher of Private Student Loan Guru. “As a general rule, borrowers should choose a loan with the highest monthly loan payment they can afford, as this usually saves them the most money.”

Visit Credible to view a pricing table for compare fixed and variable interest rates from several lenders at once.

How to get a lower interest rate on your student loan

Since lenders have complete control over the rates they set, your rate quotes can vary greatly from one company to another. This is why shopping is so important.

“You are comparing the best deals on clothing, food and electronics. Why not the same with student loans? ” Dvorkin asked. “Finding a loan that you are eligible for with a lower interest rate may take you a while, but you will be happy to save thousands in interest.”

A good way to make sure you are being offered low rates is to improve your credit rating… The best interest rates are usually reserved for borrowers with the best credit, often with a score of 740 or higher.

Another option is to set up auto payments, which can give you valuable discounts, or if your credit rating is low, consider bringing in a co-author for your loan. If the partner has good creditworthiness and a stable income, this can help you get a lower rate.

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Refinancing can help

If you are not happy with the rates on current student loans, refinancing may be an option to lower them. Basically, it replaces your old loans with new ones – ideally. one with a lower interest rate than what you are paying now.

“If a borrower’s credit rating has improved or the borrower seeks help from a creditworthy partner with a better credit rating, the borrower can qualify for a lower interest rate,” Kantrowitz said. “Refinancing is a good option for borrowers whose loans were made several years ago when interest rates were much higher.”

Visit Credible to learn more about student loan refinancing and receive customized rates from multiple lenders. You can also use student loan refinancing calculator to see how much you can save.

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Take a closer look to get the best student loan deal

Student loan rates vary, so don’t forget to keep an eye on. Graduate students and professional students may need to take out additional private loans, so it is important to make sure you get the best rate on your student loan debt. Compare rate types, repayment terms and rates and consider raising your loan for the best chance at the reduced rate.

As Dvorkin put it, “You cannot control the economy, but you can improve your credit rating to get the best rate.”

Visit Credible to private lenders survey for student loans now.

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Have a financial question but don’t know who to contact? Write to a safe money expert at moneyexpert@credible.com and your question can be answered by Credible in our Money Expert column.

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