Facts About Student Loan Rates

Guide to Lower Student Loan Interest Rates

Paying Less for Your College Education

If you’re planning on using a private loan to pay for your college education, finding good student loan rates will be extremely important. Low rates mean a less expensive loan, and if you settle for a high rate, you might end up spending hundreds of dollars unnecessarily.

Finding low student loan rates requires a solid understanding of the factors that lenders consider before quoting a loan. Most lenders will start by looking at your credit history.

Many students don’t have long credit histories, and unfortunately, this can be a disadvantage. Lenders want proof that you’ll pay back your loan. If you don’t have credit, you’re asking your lenders to take a significant risk.  You may be able to work with a co-signer, such as a parent or relative, who can help shoulder some of the risk of the loan – in turn using their credit to help you potentially lower your own interest rate.

The best student loan rates can be had by using federally-funded student loans like the Stafford or Perkins loan.  Still, there are times when not all expenses can be covered by Uncle Sam.  This is when many students look to private student loans to help make up the difference.

Steps to Follow

  • Decide how much to borrow. This is the first step in taking out any type of loan, of course, but it’s not always easy. Look at all possible sources of savings and income and try to keep your loan as small as possible. Remember that you’ll generally pay less for a smaller loan. By the same token, you should be realistic about your needs and goals. Figure out how much your major bills will cost, including tuition, living expenses and anything else that you’re planning on paying for with your loan.
  • Try to find a cosigner. A cosigner assumes some of the risk of your student loan. If you can find a cosigner with a solid credit history, you can often reduce your interest rates significantly. Try parents and other family members. Be ready to explain the loan to your cosigners, including the terms of payment, as they have a right to know what they’re getting into.
  • Get a few quotes. While all lenders will use the same general information when deciding whether to offer you a loan, student loan rates vary based on a number of other factors, including the financial strength of the lender. Comparing rates will allow you to know a good loan opportunity when you see it. Remember to use a student loan calculator with each quote to determine approximately how much you need to borrow. Otherwise, you might end up overextending yourself after you graduate.

 

Additional Tips

  • Be realistic. If you don’t have a cosigner or a credit history, you’re probably going to pay more than a more established borrower. Try to make up for it by comparing as many quotes as possible, but don’t take on repayment terms that you can’t handle. Remember that you probably won’t get a job until you’ve been out of college for a few months and manage your loan accordingly.
  • Know your lender. A low college loan rate isn’t such a great find if you’re dealing with a frustrating, unhelpful lender, and lenders with benefit programs and good customer service teams may be worth a few extra dollars per month. Know the advantages and disadvantages of your lenders before you decide where to get your college loan.

 

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