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Low Interest Student Loans

By Penny Redlin

December 2, 2021

College is the key to a future with higher earnings, better jobs, and an improved quality of life. It’s a major accomplishment to get accepted to college and enroll, but most students are unable to afford their education paying with their own money. This problem is exacerbated by the fact the college tuition continues to rise year over year.

Student loans offer the opportunity to attend college. However, borrowing the money for tuition can be daunting as the weight of student loan debt can be a dark cloud over what should be an exciting time in a student’s life.

It is possible to find lenders that offer lower interest rates than others which will translate into lots of money saved, making it worthwhile for students to shop around and find the best loan offer before committing to borrowing. Read on to learn how to find private student loans with the lowest interest rates.

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Recommendation

Best for Private Loans

Interest Rates

Variable Rates: 1.13% APR - 11.23% APR¹

Fixed Rates: 3.50% APR - 12.60% APR¹

Repayment Terms

N/A

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Variable Rates: 1.13% APR - 11.23% APR. Fixed Rates: 3.50% APR - 12.60% APR. Lowest rates shown include the auto debit discount.¹
Choose from multiple repayment options, including no payments while in school¹
No origination fee or prepayment penalty²
Cover up to 100% of your school-certified college expenses like tuition, fees, books, housing, meals, travel, and even a laptop for the entire school year³
The only undergraduate student loan that offers 4 months of Chegg® study help ⁴

This loan is for undergraduate students at participating degree-granting schools. Students who are not U.S. citizens or U.S. permanent residents must reside in the U.S., attend a participating school in the U.S., apply with a creditworthy cosigner (who must be a U.S. citizen or U.S. permanent resident) and provide an unexpired government-issued photo ID to verify their identity. Applications are subject to a requested minimum loan amount of $1,000. Current credit and other eligibility criteria apply.

¹Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. Payments may be required during the grace/separation period depending on the repayment option selected. Variable rates may increase over the life of the loan. Advertised variable rates reflect the starting range of rates and may vary outside of that range over the life of the loan. Advertised APRs assume a $10,000 loan to a borrower who attends school for 4 years and has no prior Sallie Mae loans. The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment, if available for the loan.

²Although we do not charge a penalty or fee if you prepay your loan, any prepayment will be applied as outlined in your promissory note-first to Unpaid Fees and costs, then to Unpaid Interest, and then to Current Principal.

³Loan amount cannot exceed the cost of attendance less financial aid received as certified by the school. Sallie Mae reserves the right to approve a lower loan amount than the school-certified amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half time.

⁴This promotional benefit is provided at no cost to borrowers with undergraduate or parent loans with a first disbursement between May 1, 2021 and April 30, 2022. Borrowers are not eligible to activate the benefit until July 1, 2021. Borrowers who reside in, attend school in, or borrow for a student attending school in Maine are not eligible for this benefit. Chegg Study® offers expert Q&A where students can submit up to 20 questions per month. No cash value. Terms and Conditions apply. Please visit http://www.chegg.com/legal/smtermsandconditions for complete details. This offer expires one year after issuance.

Information advertised valid as of 12/27/2021

SALLIE MAE RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS, SERVICES, AND BENEFITS AT ANY TIME WITHOUT NOTICE. CHECK SALLIEMAE.COM FOR THE MOST UP-TO-DATE PRODUCT INFORMATION.

Sallie Mae, the Sallie Mae logo, and other Sallie Mae names and logos are service marks or registered service marks of Sallie Mae Bank. All other names and logos used are the trademarks or service marks of their respective owners.

Sallie Mae loans are made by Sallie Mae Bank.

Edvisors is not the creditor for these loans and is compensated by Sallie Mae for the referral of Sallie Mae loan customers.

Recommendation

Best for Private Loans

Interest Rates

Variable rates as low as: 0.94% APR¹

Fixed rates as low as: 2.94% APR¹

Repayment Terms

5, 8, 10 or 15 years²

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Understanding Student Loan Interest

Before you start researching lenders, you should first understand exactly how interest works on a student loan balance. Unlike traditional loans, student loans often offer a grace period for six months following your enrollment to allow you time to prepare for upcoming payments after graduation. All student loans will being accruing interest from the date of disbursement.

Unless you have a federal subsidized loan (federal subsidized loans, like the Direct Subsidized Loan, the government will be your interest while you’re enrolled at least half-time, during your grace period, and any time you are in an authorized deferment), you will be responsible to repay this on top of the amount you borrowed. Even during your grace period, and through repayment, your loan will accumulate interest based on the rate indicated in your promissory note.

But how exactly does this interest work? Like any other loan, you will borrow a principal amount — for example, the sum of your school’s tuition and fees— and then repay that principal plus the interest rate you have agreed to. For a $30,000 loan that carries the average student loan interest rate of 5.8%, then, you would pay $9,600 in interest over the course of ten years.

More>>>Calculate the amount of interest on your loan

Unlike other types of loans, some student loans often offer the opportunity to enter into a period of forbearance or deferment. In both cases, payments may not be required for an extended time. Many borrowers mistakenly believe that interest does not accrue during such periods, but in most cases, it will. The interest of your student loans will continue to be added to its principal, even when payments are not required.

How to Find Low Interest Student Loans

Before you decide on a student loan, it’s advantageous to consider all options and find the lender who offers the lowest interest rate. Different lenders will offer different loan terms, so it’s worth your time to do some research and find the lender who offers the most beneficial conditions. How do you find the lowest rates and best repayment terms? There are a few ways to find lenders who are likely to offer optimal rates.

You can start with an internet search for “low interest student loans” and see what results are available. You’ll likely find that there are many private lenders who offer low interest student loans that you can easily apply for. Look at the rates advertised by different lenders as well as the repayment terms and choose a few top contenders to submit applications to.

As you do your research, it’s important to understand that there are two types of interest rates that will be offered by the banks, fixed and variable interest. Fixed interest is exactly how it sounds, the rate is fixed (i.e. it doesn’t change) over the length of the repayment term. Variable rates will fluctuate with market conditions and can move up or down during the repayment period, causing monthly payments to change as rates change.

Variable rates are generally lower than fixed rates, so when comparing rates, naturally they will look more attractive. However, you will need to consider your financial needs and determine which is better for you in the long run – a fixed or a variable rate.

Some people prefer the stability of the fixed rate, while others are willing to contend with the risk of the rate moving up to get the lower rate in the beginning. If you are considering a variable rate loan, make sure you can afford the payments at the lower and higher interest rate.

Remember that interest rate isn’t the only factor you should pay attention to when you are shopping for a student loan lender. You should also pay attention to factors such as available repayment options — this will affect your monthly payment in addition to the interest rate.

Longer loan terms can offer lower payments but actually be more expensive in the end with the total amount paid higher than if you would have chosen a shorter term. It is possible though to find loans with a shorter repayment plan will come with a low interest rate, too. This is why it’s important to shop around.

Different Loan Repayment Options

What kind of repayment options are available on student loans? The answer to this question depends on the lender you select, but generally speaking, there are a few key differences between options that every borrower should be aware of — the first being the repayment term. Some loans will offer repayment terms of up to as much as 30 years, while others offer much shorter terms of ten years. This makes a major difference in how much you pay monthly, so it’s important to pay attention to.

You should also pay attention to whether the loans you are considering offer variable rates or fixed interest rates. As mentioned above, the variable rate is unique because it fluctuates based on the ups and downs of market interest rates — this means that your interest rate may be lower, but it also could be higher.

A fixed interest rate, on the other hand, offers a set interest rate that will not change throughout the duration of the loan. This may be preferable to people who would rather have a stable repayment plan instead of one that may fluctuate.

Qualifying for the Lowest Interest Rate

A big part of scoring the lowest interest rate on a private student loan is having a good credit score. Your credit score will determine the loan amounts you are offered, as well as the interest rate that a lender approves. The higher your credit score is, the lower your interest rate will be. Your score is based on multiple factors in your credit history such as:

Percentage of payments made on time
Amount of debt in borrower’s name
Credit utilization ratio
Accounts that may be in collections

of these elements can affect the interest rate that a lender offers you. If your credit history is less than perfect, you might be forced to accept a loan with a higher interest rate if you apply for the student loan on your own. It’s not uncommon for students to have cosigners to help them not only qualify for a loan but to also secure the lowest possible interest rate taking advantage of the cosigner’s strong credit score and credit history.

If you use a cosigner, it’s important to mention that the cosigner is just as responsible for the loan as you are. It is possible to release the cosigner (if the lender allows for this) with a minimum number of on-time, in-full, consecutive monthly payments, and meeting other criteria in your loan’s terms. This is generally for students with at least 24 on-time payments, but terms will vary by lender and can be more or less, as stated in the terms and conditions of the loan.

Private vs. Federal Student Loans

When discussing differences in interest rates and repayment plans, it’s important to note that many of options noted above are based on private student loans. Federal student loans have interest rates that are determined by the federal government and non-negotiable.

That said, most students will opt for federal student loans because of subsidized loan options (meaning the government will cover the cost of your interest while you are enrolled in school at least half-time, during your grace period, and during authorized periods of deferment), but this isn’t necessarily the best option for every student.

Federal loans are granted after a student completes the FAFSA® (Free Application for Federal Student Aid). A student’s credit history or income are not taken into account, meaning that it is much easier to get approved for federal funds than private funds.

In fact, students are typically only denied if they have been convicted of a specific felony or if they have maxed out their loan availability. Federal loans are also eligible for loan forgiveness in some cases, and may be further subsidized by additional financial aid if the borrower qualifies.

Private student loans can help pay expenses that are not covered by federal student loans but are needed to finance the remainder of your school’s cost of attendance, and they can offer competitive and sometimes interest rates depending on your credit.

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