Student loans can feel like a significant financial burden, and getting a lower interest rate on your debt could potentially save you hundreds, if not thousands, of dollars. While there aren’t many opportunities to lower your student loan interest rates, here are options that can help.
1. Set up automatic payments
Ensuring on-time payments is a top priority for student loan servicers and lenders, and one of the best ways to do that is to get your account on autopay. As a result, many federal loan servicers and even private lenders offer an interest rate discount — typically 0.25% — if you set up automatic payments from your bank account.
That’s not a lot, but it can shave a few dollars off your monthly payment, which adds up over time. Even if you don’t get a discount, having your payments deducted from your bank account automatically can make your life easier and ease any anxiety you might have about missing a payment.
2. Refinance your student loans
If you have private student loans, you may be able to score a lower interest rate by refinancing them with a private lender. Refinancing involves replacing one or more loans with a new one, and if your credit history and income are in good shape, you may be able to qualify for an interest rate and monthly payment that’s lower than what you’re currently paying.
Keep in mind, though, that if you refinance federal loans, you’ll lose many benefits, including access to loan forgiveness programs, income-driven repayment plans, any potential widespread payment pauses or cancellation, and generous deferment and forbearance options.
Some lenders offer both fixed and variable interest rates, and variable rates are typically lower — at least at the start. However, variable rates will fluctuate over time with market rates, so it may not be worth the potential anxiety over your rates increasing in the future.
If you can’t qualify for a lower interest rate on your own, you may be able to with a creditworthy cosigner.
Splash Financial is a student loan refinance marketplace that matches you with a lender with a low interest rate.
3. Get a relationship discount
In addition to an autopay discount, some private lenders also offer a discount if you have another account with them when you apply for a private student loan or student loan refinancing.
For example, Citizens Bank offers a 0.25% discount on your rate if you or your cosigner has an eligible account, which includes banking and loan accounts with the bank, at the time of your application. And if you’ve ever borrowed with SoFi before, you may be eligible for a 0.125% discount on new loans.
4. Use the ChangEd App
While it isn’t going to lower your interest rate, the ChangEd app could help reduce what you’ll be paying towards interest. The app links to your student loans – both federal and private – and puts extra money towards your student loan balance. It rounds up your purchases and applies the spare change towards your student loan debt. Learn how it works.
The bottom line
While your options to score a lower interest rate are limited, it is possible for some. If you can’t get a lower rate, though, look for other ways to get relief.
For example, if you have federal loans and are struggling to keep up with payments, consider an income-driven repayment plan. Also, there are loan forgiveness and repayment assistance programs that can help you eliminate your debt faster.
The important thing is to proactively look for ways you can tackle your student loan debt and reduce what you pay in interest.
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