Are you trying to figure out what you’re going to pay on student loans over the life of the loan? Student loan interest rates are very important to getting the best deals, and knowing what your debt is going to look like in the future.
One of the problems with student loan interest rates is that they’re sort of complicated and hard for many borrowers to understand. It’s not just a question of getting a specific number – it’s important to know the context of the interest rates, and what they mean in the market.
So here’s a little bit about finding the best personal loan and federal loan interest rates for student loans.
Federal and Private Student Loans
One of the first things to know is that in most cases, federal loans are preferable to private student loans.
That’s partly because federal loans are regulated by the government and tend to come with some lower interest rates.
In addition, most federal student loans come without:
- · Credit checks
- Income requirements
- Need for cosigners
By contrast, private student loans are a lot like some other kinds of personal loans. The lenders want to impose additional requirements, to make sure that their money is safe.
So when you’re looking for student loan interest rates, federal loans are going to be different from private student loans. You’ll probably want to look into federal loans first.
Types of Federal and Private Student Loans
It’s also important to know that there are different categories of loans for both federal loans and private student loans.
When it comes to federal loans, the government has established these loan types:
- Direct subsidized loans
- Direct unsubsidized loans
- Direct PLUS loans
Each of these has a different rate scale set to it. There are also different loan types according to your status as an undergrad or graduate student. That last category, PLUS loans, is for parents. The federal site GovLoans.Gov says this:
“The school applies PLUS loan funds toward your child’s educational costs such as tuition, fees, and room and board. If any loan funds remain after school charges are paid, you will receive the remaining amount from the school, unless you authorized the school to release the funds to your child. Any funds you or your child receives must be used to pay the child’s educational expenses.”
So think about which of these categories of loans you are looking for.
Fixed Rate or Variable (Adjustable) Rate Student Loans
Another thing you want to think about is whether you want a fixed rate or adjustable rate student loan.
Most kinds of lending have this option – to get a fixed rate that won’t change over the life of your loan, or to get an adjustable or variable rate that may actually rise or fall depending on the market conditions.
Now, many borrowers prefer fixed-rate loans, and would be unhappy with an adjustable-rate loan, particularly if the interest rates rise a lot in the future. Interest rates have already risen quite a bit from where they were a couple of years ago, so that’s something to keep in mind.
Student Loans and Dynamic Activity in Interest Rates
If you’re learning about interest rates for the first time, this is one of the most important things to know – interest rates change!
In fact, they change every day. Part of getting a good loan is staying up on interest rates and how they are changing in any given day or week. You’re going to want to know, for example, how much higher they are now than where they were last week or last month. And, borrowers have to act fast to lock in particular interest rates. This Nerdwallet piece has more on what to look for as rates go up and down.
Interest Rate Ranges
Also, when you’re looking for student loan interest rates, you’re not just going to get one number.
Here’s an example from Forbes for the month of December. You have a fixed APR from one lender of 4.49% to 16.99% for fixed rate loan, and an adjustable rate from 5.59% to 16.99%
You have Sallie Mae loans with fixed APR from 4.5% to 15.49%, and variable APR from 6.37% to 16.7%.
Now, those are big ranges. 5% is quite a bit different from 16%, and somebody with the rate on the higher end is going to pay much more money over time.
The thing to know is that the rates that you get will vary depending on underlying market conditions, your credit score, and other crucial factors.
So the actual number of your interest rate is going to come in a conversation between you and the lender, often through an intermediary, like a loan representative.
That’s a little bit about where private interest loan interest rates are right now, and what you can do to get the best interest rate on your student loans. But don’t stop there. Read up on the rest of the blog, because in addition to good interest rates, you need a loan with eligibility for forbearance programs and other extras. You need to be sure that you don’t get stuck with a bad lender or loan servicer that is going to give you the runaround. We have illustrated a lot of the pitfalls of this industry, to help borrowers know their rights and find solid ground in borrowing for higher education!
