Ways to lower the interest rate on your student loan
On average, Class of 2020 graduates who took out loans left college with $ 29,927 in student loan debt. In itself, that’s a lot to digest. But with an interest rate of 5.8% (the average student loan interest rate among all existing borrowers) and a 10-year repayment plan, you’ll end up paying a total of $ 39,510 for your loan. student.
With thousands of dollars at stake, learning how to get a lower interest rate on student loans could save you a lot of time. The options may vary depending on the type of student loan you have and your current rates. Read on to learn more about your choices.
Federal or private student loans
First of all, it’s important to understand that your options for getting a lower student loan interest rate will depend on the type of loan you have.
With federal student loans, for example, their consolidation through the Department of Education will result in a slightly higher interest rate, not a lower one. Indeed, the new rate is the weighted average of the interest rates on the loans in consolidation, rounded to the eighth of 1% higher. In addition, the rates are set by Congress, so there is no leeway for negotiation. For the most part, your best bet is to refinance your loans with a private lender.
Even then, federal student loans tend to have lower interest rates in general, especially for undergraduates. So unless your credit history is in great shape and you have a high income, you could be stuck with what you have. Also, if you refinance your federal loan with a private lender, you are waiving any federal loan waiver or forbearance program.
With private student loans, on the other hand, you’ll have more opportunities to work with your current or new lender to save interest, reduce student loan payments, and more.