High Interest Rates
When interest is added to your already costly loan payments, the extra obligations can push your debt from attainable to unaffordable fast.
Interest rates are typically unavoidable, especially if you have a federal loan. However, there’s no cookie-cutter interest rate for student loan borrowers – it will depend on the following criteria:
- Federal vs. private loan
- Undergraduate or graduate
- Subsidized or unsubsidized
- When you received the loan
You’re Not Stuck with Your Interest Rate
You can get a lower interest rate if you’re able to pay off your loan faster.
For example, if you have a 10-year loan with four percent interest, the lender may give you a lower interest (e.g. 2.5 percent) if you agree to pay off the loan in five years. However, your monthly overall payment will be higher because of the shorter timeframe – but save you in the long run. In short: the shorter the loan period, the lower the interest.
Federal vs. Private Loan Rates
Federal interest rates set by the government vary by loan type
, whereas private loan interest rates are based on factors such as:
- Credit history
- Credit score
- Borrowing power
- Payment length
Federal loans can have double to triple the interest of a private lender, depending on your situation. A potential solution for a high federal rate is to follow this three-step process:
- Borrow money from a private lender at lower interest
- Pay off your federal student loan faster
- Pay back the low-interest private loan
This plan is ideal if you can stick to the payment schedule. The downside is you will lose any income-based repayment options or forbearance offered by the federal government.
Student Loan Solver can review your current loan status and life circumstances to see if restructuring your loan for a lower interest rate is the right path for you. We can see what other options are available to you, so you can pay off student debt in the most efficient and affordable way possible.