Several Federal Reserve interest rate hikes over the past year have made everything from buying a home to paying down credit card debt more expensive. For students, that also means it’s more costly to borrow money for college.
Fortunately, if you’re planning to apply for student loans this year, there are still ways you can get a competitive interest rate. You may be able to qualify for rates as low as about 5% APR depending on the details of your application, though rates can range up to 15%. And scoring the best rate possible this year can save you a lot of money over time — the lower your interest rate, the lower your monthly payments may be and the faster you can pay off your loans in full.
Start exploring options you qualify for here now.
How to get the best rates on student loans this year
Interest rates may be higher across the board, but take these actions to ensure you qualify for the best possible rate on student loans this year:
Compare different options
When it comes to student loans, it can pay to shop around. You may qualify for vastly different interest rates with different lenders.
If you’re considering federal student loans, they carry fixed interest rates that range from 4.99% to 7.54% for the year ahead, depending on the type of loan you get.
For private student loans, the lender you choose will have a big effect on your interest rate. A good way to compare the rates available to you is by checking for pre-qualification. You can go to a lender’s website and enter your information, then find out whether you qualify for a loan and a rate range. By checking for your pre-qualification with a few different lenders, you can easily find the best interest rates for you.
You can start by exploring student loan rates available to you here now.
Decide between fixed and variable rates
Private student loans may come with fixed or variable interest rates, and the type of interest rate you choose could impact the overall amount you pay over the long term.
With a fixed interest rate, you can lock in your rate for the lifetime of the loan. Given today’s rising rate environment, you may want to choose a fixed-rate student loan so you won’t be affected by any further interest rate hikes. Federal student loans all carry fixed interest rates. If you choose a private lender, some offer slightly lower interest rate ranges for fixed loans compared to a variable.
Variable interest rates, on the other hand, change over time as interest rates move up or down. While we can’t predict the future, variable interest may be a good option if you believe rates will fall before you pay down your loan in full, and reduce your overall payments.
Boost your credit score
Like other loan types, your credit score often plays a big role in which student loans you can get and the terms you’ll qualify for.
A great credit score can increase your chances of qualifying for today’s best student loan rates — which for some lenders may be as low as 4.5% to 5% APR.
There are a few different factors that can go into your overall credit score, but making the monthly payments on any open credit accounts you own both in full and on time is a great place to start. If you have credit cards, make sure you keep your utilization low and avoid spending close to your credit limit. Practicing good credit habits over time can help you build and maintain good credit that will help you get the best rates anytime you borrow money.
If you’re still working on your credit, another way to qualify for the best rates is to apply with a co-signer who has great credit and can help you qualify. Start checking rates you can qualify for now.
Take advantage of discounts
Some student loan lenders offer discounts and incentives for certain activities that can help you reduce the interest rate you’re assigned this year.
If you’re already paying down your loans, you may be able to get your interest rates reduced by a certain percentage if you set up automatic payments each month. Some lenders also offer loyalty discounts for customers with existing loans or banking products with them. For example, SoFi offers 0.125% off your interest rate if you or your co-signer are existing SoFi members already. Others offer incentives for good grades, with GPA requirements.
The bottom line
Interest rates are up, but you can still save on student loans by making sure you qualify for the best rates available now. Make sure you compare different lenders, shop for rates and take advantage of any discounts you might qualify for. By scoring the best interest rate on your loans today, you can reduce your repayment period and overall loan amount, so you can pay off your debt more quickly over time.
Learn more about student loan rates you can qualify for in your area today.