How to Get a Better Student Loan Rate
Borrowing money through student loans can provide you with access to the funds you need to get a higher education. While these funds are typically simple to access, they can help you accumulate a large amount of debt at the same time. When getting student loans, securing the lowest interest rate possible can help you reduce the total amount you pay for your education. You can take several steps to potentially get a lower interest rate on your student loans.
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Instructions
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Shop around for the best interest rates when you are initially looking for loans. While government loans all carry the same interest rates, you could shop around from one lender to the next if you are in the market for a private student loan.
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Set up an automatic payment plan. Many lenders offer a discount on your interest rate if you are willing to allow payments to be automatically deducted from your bank account. This way, the lender does not have to worry about you sending in your payment every month.
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Make your payments on time every month. While this may not help with every lender, some lenders will actually give you a discount after you have made your payments on time for a certain period. For example, after four years of payments, you may get a 0.25 percent interest rate deduction.
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Refinance your existing student loans with another loan. While you are not able to get another federal student loan to refinance your existing loans, you could get another type of loan to pay them off. For example, you could refinance your home or take out a home-equity loan and pay off your student loans.
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Consolidate your student loans after you graduate from college. If you have multiple student loans, you have the option to consolidate them into a single loan. This way, you only make one payment every month. When you do this, you may have the opportunity to lower your interest rate as well.
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Tips & Warnings
Refinancing your student loans into another type of debt could have negative tax consequences for you. Student loan interest is tax-deductible, while some other types of loans are not. Consider whether losing the tax deduction is worth the savings in interest you would get from a refinance.
