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If you’re looking for a student loan to help pay for the cost of college, federal Direct Loans usually offer the lowest interest rates.
Those with excellent credit, however, might be able to find lower rates with private student loans. Your financial information, including your credit history, can help you qualify for low interest student loans.
If you’ve already used up your federal student loans, here’s how to find low interest student loans:
- Have good credit
- Focus on debt to income
- Get a cosigner
- Choose a shorter repayment term
- Look for discounts
- Compare lenders
1. Have good credit
Once you use up subsidized and unsubsidized federal student loans, it’s a good idea to consider private student loans. There are several factors in the interest rate, but one of the biggest factors is your credit. A good credit score can be the difference between getting approved at all.
Current rates for fixed-rate private student loans start at 3.82%+ for those with excellent credit. If you have a low credit score, you could pay multiple times that. If you don’t know your credit score, you can get access for free through several popular apps.
Learn More: Compare Credit Score Ranges
2. Focus on debt to income
In addition to looking at your credit, lenders also consider your existing debt. They’ll add up all of your minimum monthly payments for existing debts compared to your income. A higher debt load compared to your income shows a risk that you might not be able to repay the new loan. A lower debt-to-income ratio shows you’re in a strong position to make regular payments. Typically, lenders look for a DTI of 50% or lower — the lower the better.
If you’re able to pay off any credit card balances or other loans at least a month before applying for your student loans, it will lower your minimum monthly payments on your credit report and improve your debt-to-income. This could help you qualify for lower student loan rates. Make sure you’re not closing these accounts, though; that could actually hurt your credit score.
How to calculate your DTI
(Total monthly payments ÷ monthly income) x 100 = DTI
Keep Reading: Debt-to-Income Ratio
3. Get a cosigner
If you have bad credit or no credit, it could take more time than you have to turn around your credit or establish a good credit score. In that case, you might do better with a cosigner. Cosigners can share their good credit score with you to qualify for a lower rate. However, they also take on full responsibility for repaying the loan.
Many students usually look to their parents to cosign — in fact, over 90% of private student loans are cosigned. Grandparents and other relatives might also consider cosigning.
Credible allows you to compare different cosigners on your loan to help you see which cosigner will help get you the lowest rate.
Find Out: How to Get a Cosigner
4. Choose a shorter repayment term
If you’re able to afford a higher monthly payment, a shorter repayment term saves you money in a couple of ways:
- Save money with a lower interest rate: Longer term loans are considered riskier by lenders, so typically the longer the term, the higher the rate. With a shorter term, you can get a lower rate and pay less over the life of your loan.
- Paying interest for a shorter period of time: With a shorter term, you’ll be paying off your loan sooner. When your loan is paid off sooner, you stop paying interest.
Learn More: APR vs. Interest Rate: What’s the Difference?
5. Look for discounts
Some student lenders are willing to give you a discount for meeting certain criteria or requirements. For example, many popular lenders give a 0.25% discount when you enroll in automatic payments. But keep in mind that if you’re not paying your loan off when in school, this discount usually won’t apply and the higher interest rate will accrue.
Some lenders might have other unique discount programs to further lower your rate — like loyalty or good-grade discounts. If you qualify, definitely take advantage of these as they can really add up.
Read More: Student Loan Interest Rates
6. Compare lenders
Federal student loan rates are set by the government, but private lenders can set their own rates for student loans. Shopping around will help you find the best rate for your situation.
Credible helps you save time shopping around by letting you compare offers from multiple lenders by filling out just one simple form.
Lowest APRs reflect autopay, loyalty, and interest-only repayment discounts where available | 1Citizens Bank Disclosures | 2,3College Ave Disclosures | 6Discover Disclosures | 8EDvestinU Disclosures | 9Sallie Mae Disclosures
Lender Fixed rates from (APR) Variable rates from (APR)
5.88%+ 5.20%+
4.40%+1 1.95%+1
4.31%+2,3
2.69%+2,3
5.09% - 12.49%6 2.15% - 10.37%6
4.52%+8 3.01%+8
4.09%+ 2.77%+
3.95%+ N/A
4.74% - 11.85%9 2.00% - 10.01%9
your credit score. 100% free!
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Citizens Bank Student Loan Rate Disclosure
Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 1, 2020, the one-month LIBOR rate is 0.92%. Variable interest rates range from 1.95%-10.28% (1.95%-10.13% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.40%-12.19% (4.40% - 12.04% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co- signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.
Low interest student loans for parents
Parents looking to take on student loans to help finance their student’s education might consider Parent PLUS Loans first, but that isn’t your only loan option. Parents with good credit scores might be able to find cheaper loans through private lenders than the PLUS program.
Parents might also be able to save on existing PLUS loans by refinancing to a new loan with a lower interest rate. Be sure to note the origination fee on Parent PLUS loans that can significantly increase the loan’s APR, often by about a full percentage point.
Learn More: Parent PLUS Loans vs. Private Student Loans
Take charge of your student loan interest rates
It can feel like the government, banks, and other lenders are in charge of your student loan interest rates, but you have a lot of influence over whether you have low interest student loans or pay more.
With a focus on your credit and other aspects of your finances, you might be able to lower your existing loan rates or qualify for lower rates in the future.
Keep Reading: How to Take Out a Student Loan
Methodology: Credible evaluated loan and lender data points in 10 categories to identify the “best companies” for private student loans. We looked at interest rates, repayment terms, repayment options, fees, discounts, and eligibility. We also considered each company’s level of customer service provided, cosigner release options, whether the minimum credit score is available publicly, and whether consumers could request rates with a soft credit check. Credible receives compensation from its lender partners when a user of the Credible platform closes a loan with the lender.