Solidifying A Better Future For My Kids

Lower Your Student Loans' Interest Rates With These 2 Tips

29 November 2016

Jackie Watts

Student loans typically have low interest rates. According to Student Loan Hero, the average interest rate for federal student loans in the 2015 to 2016 academic year was between 4.29 and 6.84 percent, and private student loan interest rates usually falling between 9 and 12 percent. These ranges are less than the average credit card interest rate, which is 15.07 percent. On large student loans, however, even a small interest rate can add up. If you have student loans, here are some ways you can keep their rates low -- and save on how much you pay.

Sign Up for Automatic Billing

Many student loan administrators offer a small discount to loan holders who sign up for automatic billing. Not only can signing up for this option help you shave a little off of your loan interest rates, but it also ensures you won't have to pay a late fee because you forgot to submit a payment on time.

The discount offered for participating in automatic billing is usually small. Edvisors reports that the U.S. Department of Education provides a 0.25 percent rate reduction on federal loans, and private student loan providers often offer a 0.25 to 0.50 percent reduction.

A reduction of 0.25 percent won't make you rich, but every amount you can save helps -- especially if you're a recent graduate struggling to make ends meet. If you have $30,000 in student loans, a 0.25 percent reduction in your annual loan interest rate would save you $75 in the first year of your loan repayments. If your loans total $200,000, the reduction would save you $500 in the first year.

Refinance Your Student Loans

When refinancing your student loans, you take out a new student loan that's used to pay off one or more old student loans. While transitioning your loan balance from one loan provider to another won't reduce how much you own, it can provide a big reduction in the interest rates on your loans.

If you're out of college and have a stable job, lenders may view you as much less risky than when you were applying to college, and your future was uncertain. Because you're more established and financially secure, they may be willing to offer you a lower interest rate than they previously did. To find out, you'll have to shop around for refinanced student loans. Start by contacting your current loan provider and asking whether they offer any refinancing options.

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