For the 2021-2022 academic year, the average interest rate for federal student loans was 3.73% for undergraduates, 5.28% for graduate students, and 6.28% for parents and graduate students taking out PLUS loans. While it’s challenging to determine the average for private student loans simply due to how much the interest rates vary, they tend to be even higher.
Finding ways to lower your student loan interest rate could lower your overall monthly payment and save you money over time. Here’s how to lower your student loan interest rate for both federal and private student loans.
Can I Get a Lower Interest Rate on My Federal Loans?
Interest rates on federal student loans are set by Congress each year and are technically considered law. Unfortunately, this means that borrowers of federal student loans can’t negotiate their way into a better interest rate.
However, you may be able to get a small reduction on your interest rate by opting into automatic payments. If you agree to make payments on your loan through autopay, a system that automatically takes the monthly payment amount straight from your bank account, you may be able to secure around a 0.25 to 0.50 percentage point reduction in your interest rate.
If you’re confident this method wouldn’t send you into a spiral of overdraft fees, it may be a good option to enroll in auto-debit payments to save you a bit of interest.
Note: Be sure to check with your federal loan servicer to see if they offer interest rate discounts for setting up autopay.
Can I Get a Lower Interest Rate on My Private Loans?
Interest rates on private loans are set by the lender themselves and based on a variety of factors such as your credit score and income. This means that the rates are not set in stone as with federal student loans. Private lenders may be open to negotiation or reevaluating your interest rate.
The latest rates from Sparrow’s partners
If you want to skip pre-qualification and apply directly with a lender, you can do so by clicking Apply below.
Proactive Steps to Lower Your Private Loan Interest Rate
If you’re thinking about taking out a private student loan, there are a few things you should do beforehand that will help you secure a lower interest rate when you apply:
Take a Look at Your Credit Score
Interest rates are calculated based on a variety of factors, one of which being your credit score. Ensuring you have a solid credit score before applying for a private loan will help you get a lower interest rate.
Although each lender is different, in general, private lenders look for credit scores around 660 or above. While you can still get a private loan with a bad credit score, your interest rates will be higher. If your credit score isn’t great, don’t worry. There are things you can do to raise it.
Find Someone Willing to Cosign
A cosigner is someone who signs onto the loan alongside the borrower, agreeing to pay back the loan if the borrower doesn’t. Having a cosigner with a good credit score can help you secure a lower interest rate on your private loan because lenders will assume less risk. Given that most young people have a limited credit history, cosigners are very common for private student loans. In fact, around 90% of undergraduate students use a cosigner for their student loans.
The only “risk” to having someone cosign is that they are technically equally responsible for the loan, meaning that if you fail to make payments on the loan, it could hurt their credit score.
Compare Interest Rates Carefully
As always, before jumping into any private loan, it’s important to compare multiple private lenders to find the lowest rate. Complete Sparrow’s request to compare real rates from more than 10 different lenders to make sure you’re getting the best rate possible.
Lowering Your Interest Rate If You Already Have a Loan
If you already have a private student loan, you can lower your interest rate by:
Opting Into Automatic Payments
As with federal loans, many private lenders also offer a discount for opting into an autopay system. While the rate may only drop by 0.25 to 0.5 percent, every bit makes a difference.
Even if you only saved $10 a month from this decrease in interest, that would be $1,200 over the course of a 10-year repayment.
Refinancing Your Student Loans
If you have a stable income and plan to pay off your student debt quickly, you should consider refinancing for a lower interest rate.
Refinancing your loan is the process of taking out a new loan with a lower interest rate to pay off the loan you currently have. By doing this, you can reduce your payments and save on interest.
Borrowers can also choose to consolidate their federal student loans through a Direct Consolidation Loan. The new interest rate will be the average of the rates on the loans you are consolidating. However, you’ll want to consider some of the benefits associated with federal student loans that you’d be giving up, such as income-driven repayment, the possibility of loan forgiveness, and other federal borrower protections.
Negotiate with the Lender
This method won’t guarantee you any savings in interest, but it’s always worth a shot. Look around online for private lenders offering competitive interest rates and present it to the lender you’re already working with. The lender might be willing to make alterations to the rate you previously agreed upon in an effort to keep you as a customer.
Student loan rates from our partners
Ascent
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
LendKey
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
Earnest
Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
College Ave
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
(2) As certified by your school and less any other financial aid you might receive. Minimum $1,000.
(3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
(2) As certified by your school and less any other financial aid you might receive. Minimum $1,000.
(3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
Final Thoughts from the Nest
Finding a way to lower your student loan interest rate is one of the best ways to save yourself money in the long run. While not all methods will work for everyone, it’s likely that if you’re trying different approaches, you’ll find at least one that will work.
When you’re ready to begin the student loan process, or if you’re looking to refinance, we’re here to help.