Paying off student loan debt takes up a lot of time, money, and effort. A good way to help repay loans is to lower your student loan interest rates. Having student loan debt with high-interest rates makes you feel like you keep making monthly payments, but your balance doesn’t seem to budge. It makes you feel like you aren’t progressing towards your financial goals at all.
If you can lower your student loan interest rates, it’ll help you whittle away the principal amount of your debt much faster, and it will help reduce your monthly payments and help you save more over time.
Over 30% of college students in the United States take on student loans to complete their education. A college student’s average amount of student loan debt is $38,792. And with average interest rates at the 5%-to-6%-mark, people need all the help they can get. Here are a few ways you can lower your student loan interest rates.
Refinance Your Student Loan
Refinancing basically means taking out a new loan from a new lender to pay off your student loan debt. The new lender pays off your student loan debt, and you will have to start paying your new lender off. Refinancing could get you better repayment terms and lower interest rates.
Having a good credit score will let you qualify for better repayment terms and interest rates. This is primarily only true for those who already have a good credit score and can quickly pay off their loans. With a bad credit score, you might still be able to refinance, but there is a high chance you won’t be able to get a lower interest rate.
The best thing is you can refinance your loans multiple times. This means if your credit score or financial situation improves, you can refinance your student debt again and negotiate better terms.
Note: Keep in mind refinancing your federal loans means you can’t take advantage of federal loan benefits, like income-driven repayment plans and loan forgiveness programs.
Make Use of Discounts
Almost all federal and private lenders provide discounts if you automate your loan payments. This discount is usually around 0.25%, which might not seem much but can add up to a lot over time. If you have a 6% interest rate, you will lower your interest rate to 5.75% if you automate your payments.
Another benefit of automating your payments is you won’t have to worry about missed or delayed payments hurting your credit score. You just need to make sure you always have enough money in your account to cover the monthly payments. Lenders provide these discounts as it is less costly in the long run than processing and collecting missed payments.
Many lenders also provide loyalty discounts which are usually around 0.25%, depending on the lender. Ask your lender if they offer any discounts and whether you qualify for them.
Negotiate With Your Current Lender
Of course, negotiating only works with private loans as Congress sets federal student loan interest rates. Negotiating with your lender can be surprisingly effective.
Do a little research and see if you can get better rates through different lenders. Once you have found a few that offer you lower rates, you can talk to your lender, and they might be willing to adjust your interest rates to retain you as their customer.
This is an especially good option for students who took out loans during high-interest rate environments, as lenders might be more willing to reconsider in those circumstances.
