Low-Interest Student Loans

When borrowing money for education, securing a low interest rate is crucial. It affects the total cost of the loan and your monthly payments. The lower the interest rate, the less you’ll pay over the life of the loan.

Depending on your or your cosigner’s credit profile, federal student loans may offer lower interest rates than private loans, making them a more affordable option. Finding a student loan with a low interest rate is essential to minimizing your debt burden.

Lender	Rates (APR)	Best for
Sallie Mae	2% – 12.35%	Cosigners
College Ave	0.94% – 12.99%1	Private student loans
Earnest	1.34% – 11.44%	Large loans
Ascent*	0.98% – 10.29%	Deferred repayment
Citizens Bank	1.86% – 9.39%	Multiyear approval
Dept. of Education	6.53% – 9.08%	Federal student loans

Private student loans with low rates

Private student loan interest rates vary based on your credit score, income, loan amount, and whether you have a cosigner. To secure the lowest rate, it’s important to compare offers from multiple lenders. Depending on your or your cosigner’s credit score, private loans may have higher interest rates than federal loans.

The rate you qualify for will depend on several key factors:

• Credit score and credit history: Borrowers with strong credit scores are likelier to be eligible for a lower interest rate.
• Income: Higher income levels can make you a less risky borrower, often resulting in better rates.
• Loan amount: Larger loan amounts may come with higher rates due to the increased risk for the lender.
• Rate type: Variable rates may start lower than fixed rates but can fluctuate over time, potentially increasing your payments.
• Repayment term: Longer repayment terms usually have higher interest rates and increase the total loan cost.

Lender	Rates (APR)
Ascent*	0.98% – 10.29%
Citizens Bank	1.86% – 9.39%
College Ave	0.94% – 12.99%1
Earnest	1.34% – 11.44%
Sallie Mae	2% – 12.35%

Private student loan interest rates vary based on factors like your credit score, income, loan amount, and whether you have a cosigner. To secure the lowest rate, it’s important to compare offers from multiple lenders. Generally, private loans have higher interest rates than federal loans, and the rate you qualify for will depend on several key factors:

• Credit score and history: Borrowers with strong credit scores are more likely to receive lower interest rates.
• Income: Higher income levels can make you a less risky borrower, often resulting in better rates.
• Loan amount: Larger loan amounts may come with higher rates due to the increased risk for the lender.
• Rate type: Variable rates typically start lower than fixed rates but can fluctuate over time, potentially increasing your payments.
• Repayment term: Longer repayment terms usually have higher interest rates and increase the total loan cost.

When comparing rates, look at the annual percentage rate (APR), which includes the interest rate and any fees, giving you the true cost of the loan. Many private lenders offer rate discounts if you sign up for automatic payments.

In contrast, federal student loans offer a single fixed interest rate that doesn’t vary based on credit score, income, or loan amount and is updated annually for new loans.

Low-interest federal student loans

While federal student loans often provide more borrower protections and flexible repayment options, their interest rates are not always lower than private student loans, especially for borrowers with excellent credit. Federal student loan rates are standardized by the government each year and do not vary based on your credit score or income.

Federal loan amounts may be limited, depending on whether you’re an undergraduate or graduate student. Your school’s financial aid office determines your eligibility for different types of federal loans after you complete the Free Application for Federal Student Aid (FAFSA).

Federal loans offer only fixed interest rates, meaning the rate remains constant for the life of the loan. The interest rates vary depending on the type of loan and the borrower’s status. Here’s a summary of the current rates and eligible borrowers:

Loan type	Rate	Borrower
Direct Subsidized or Unsubsidized Loan	4.99%	Undergraduate
Direct Unsubsidized Loan	6.54%	Graduate or professional
PLUS loans	7.54%	Graduate

Read More

Federal direct loans

How to find the lowest-interest student loan

To secure the lowest possible interest rate on a private student loan, it’s important to take several steps:

1. Shop around: Interest rates can vary between private lenders, so it’s essential to compare offers from multiple companies. Look for lenders that allow you to get rate quotes with a soft credit inquiry, which won’t affect your credit score. Starting with our list of the best private student loans can help you identify reputable lenders.
2. Consider a cosigner: If your credit history or income is limited, a cosigner with strong credit can improve your chances of securing a lower interest rate. A cosigner shares the responsibility for repaying the loan, which reduces the risk for the lender and can result in more favorable loan terms.
3. Compare and understand the pros and cons: Review the details of each loan offer, including the pros and cons of variable and fixed interest rates. A variable-rate loan carries the risk of rate increases over time. Make sure you understand how your monthly payments could change and choose a loan that fits your financial situation. Comparing loan terms ensures that you select the option that best aligns with your needs and budget.

Payments on low-interest student loans

When shopping for student loans, finding the lowest interest rate is crucial, as it can significantly impact your total repayment cost.

For example, if you borrow $50,000 with a 10-year term, even a small difference in the interest rate can lead to a substantial difference in the total amount of interest you’ll pay. Consider the following comparison:

$50,000 w/ 10-year term	Total interest paid
8% rate	$22,797
5% rate	$13,640

As this example shows, lowering your interest rate by just a few percentage points could save you over $9,000 in interest payments over the life of the loan.

What is considered a low interest rate for a student loan?

Interest rates for student loans can vary depending on market conditions, so it’s important to use current federal loan rates as a benchmark. Federal loans can offer competitive rates, especially for undergraduate students.

A private loan with a rate lower than the federal loan rate could be a solid option. However, qualifying for the lowest rates from private lenders often requires excellent credit and may also require a cosigner. By securing these favorable terms, you could potentially reduce your overall repayment costs.

How can you improve your chance at a low rate?

While you can’t change the interest rate on federal student loans, you can take steps to secure a lower rate on a private loan. Start by improving your credit score—pay down credit card balances, make all payments on time, and correct any errors on your credit report.

Compare rates from as many lenders as possible to ensure you’re getting the best deal. Shopping around can make a significant difference in the rate you receive. After securing the loan, consider signing up for automatic payments. Many lenders offer a 0.25% interest rate discount for doing so.

What if I get a high interest rate?

If you’re offered a loan with a high interest rate and haven’t finalized it, it’s wise to explore other options before proceeding. The difference between a high and low interest rate can add up to thousands of dollars over the life of the loan.

If you’ve already taken out a loan with a high rate, you might be able to refinance it at a lower rate after graduation. Many borrowers qualify for better rates once they have a steady income and a strong credit history. Adding a cosigner when you refinance can also improve your chances of securing a lower rate. To get started, consider looking into our recommendations for the best refinance student loans.

Recap of low-interest student loans

Lender	Rates (APR)	Best for
Sallie Mae	2% – 12.35%	Cosigners
College Ave	0.94% – 12.99%1	Private student loans
Earnest	1.34% – 11.44%	Large loans
Ascent*	0.98% – 10.29%	Deferred repayment
Citizens Bank	1.86% – 9.39%	Multiyear approval
Dept. of Education	6.53% – 9.08%	Federal student loans