Are you struggling to pay off your student loans? If so, here are some tips on interest rates and how they can help you.
Where is your student loan from?
Student loans are one of the most important financial obligations that students will have to pay back. The interest rates on student loans vary depending on where your loan was originated from and how long you have been paying it back. If it’s a federal loan, you can benefit from lower interest rates.
The federal government issues loans in order to aid students in furthering their education. These loans are charged with an interest rate ranging from 1% to 5%. If your student loan is from a private bank, the interest rate is typically higher than that of federal loans. For example, if you have a private loan for $100,000 at 8% APR and a federal loan for $100,000 at 5% APR, the total balance on your student loans will be $110,000.
How long does the interest rate last on my student loan?
You can also lower your interest rate by opening a repayment plan. If you have a variable-rate loan or Federal Direct Consolidation Loan and you make consecutive on-time payments, your rate will be lowered to 6%. Another way to lower your interest rate is by enrolling in an income-driven repayment plan, which may lower your monthly payment amount.
The interest rate is the rate charged on a loan and is usually expressed as a percentage. It was established when the loan was made and can change in accordance with the value of the lending institution’s investments. For federal loans, there are two rates: one for fixed-rate loans and one for variable-rate loans. The interest rate for fixed-rate loans is 3.4% for undergraduate students, 6% for graduate students, and 7% for professional students.
The interest rates for variable-rate loans are 4.5% for undergraduates and 9% for graduates.
What are my options for lowering my interest rate through my lender and Sallie Mae?
There are a few options for lowering your interest rate with your lender. One option is to take out a forbearance, which extends your grace period until the end of your repaying period.
Another option is to defer payments on some or all of your loans until after you graduate and get a job, bypassing part of the repayment process. The third option is to go into default and then apply for an income-based repayment plan.
The first thing you need to do is call your loan servicer and give them a heads up. You might be able to lower your interest rate if you are able to pay the loan off early or can reduce the amount of interest being charged on the loan.
What is the difference between a fixed rate versus an adjustable rates student loans?
Most federal loans require students to pay interest that builds up over time, which means the more time you have left on your loan, the higher the interest rate will be. There are some federal loans, however, which have an interest rate that changes based on market rates. Fixed-rate loans, by contrast, generally stay the same throughout the whole repayment period of your loan.
Fixed rates means that the interest rate stays the same while the adjustable rates can change at any time. The fixed interest rate is usually lower than an adjustable rate.
Conclusions
The new rate is lower than the previous one, which was 5.84%. The change will affect more than 77,000 students during the upcoming school year. Private and state-funded institutions will also see a decrease for their loans in 2018.
The study found that students with federal loans who also enrolled in an income-driven repayment plan had a lower interest rate than those students who did not enroll.