Where to Find the Best Student Loan Interest Rate

Student loan interest rates depend on the same factors as other loan rates: your credit score, ability to pay and asset to debt ratio. However, student loans are unique because students have a precarious financial situation. Most have short debt histories, few have incomes and only some have assets. As such, loan rates will be high unless you know which lenders have the best options.

Seek Lenders with Student Programs

Many lenders have student loan options that take the unique financial requirements of students into consideration. These lenders will extend financing based on what they believe will be your ability to pay in the future instead of your current financial abilities. Student loan options often come with low monthly payments and low interest rates for the time period you attend school. Many will also have different repayment options that cater to students. For example, income contingent options only require you start paying once you have secured an income after graduation. Seeking specific programs geared at students facing the same challenges you face will help you afford the cost of financing an education.

Start Payments Immediately

Instead of deferring payments until after graduation, you will find your rates will be much lower if you start making payments immediately. This may seem like a daunting task seeing as you will be attending college. However, you can always opt for interest only payments for the years you are in school. This will keep your interest from compounding frequently during the years you are still a student. It will also provide the lender some assurance you will make payments upon graduation. Assuring against default is the primary way to reduce an interest rate. If you can do this without using a cosigner, then you will see a greater benefit to your credit score in the future.

Opt for Work Study Arrangements

Paying loans while attending school can be very challenging. To ease the burden, seek work study arrangements with your college or university. These programs allow you to serve in on-campus jobs more flexible to the needs of a student. The hours will accommodate for your hectic schedule, and you may even be able to get school work done during the time you are working. By choosing this option, you can continue to make payments while you attend school, reducing your interest rate as well as the total cost of financing over time.

Consider Federal Guarantees and Subsidies

If you qualify for federal student loan programs, you can capitalize on the lowest interest rates available. Most loan programs provide the lowest interest rate and most flexible payment options to the neediest students. Those who come from economically disadvantaged backgrounds may find they qualify for a subsidized option; this means they will have no payments and no interest while they attend school. Even those who are more able to pay can benefit from federal guarantees, however. These guarantees provide assurance to private lenders that you will not default on the loan. If you do, the government will buy the loan out of default. As such, a private lender will give you a better rate.


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