It is a widely known fact that tuition fees in major parts of the country are very expensive, and not everyone can afford it. Here come the student loan borrowers who take out student loans to pay their tuition fees. What most borrowers don’t understand, however, is the compounding nature of student loan interest over time. Fortunately, negotiating a lower interest rate on your student loans can help you avoid situations like that. Even though the student loan terms (either federal or private) are fixed, you can still get a lower interest rate. In this article, we will discuss what student loan interest is and how to negotiate a lower rate.
Understanding Student Loan Interest
Spring of every year, the federal student loan rates are set by Congress, and they are non-negotiable. However, the interest rate differs by type of loan, date of disbursement, and type of borrower. The interest rate for unsubsidized loans for undergraduates is 4.53% (for July 1, 2019, to July 1, 2020). Private student loans, on the other hand, have an interest rate ranging from 4 to 12% with fixed or variable terms. So, how do you lower your student loan interest rate?
Ways to Lower Student Loan Interest Rates
People who have private student loans will not be able to negotiate a lower interest rate because of the terms that they have already agreed on. However, there are new methods of negotiating a new private loan rate – negotiating yourself or using a student loan negotiating company. Highlighted below are the different ways to lower your student loan interest rate, especially if you are paying too much.
Refinance your student loan
An effective way of lowering your student loan interest rate is by refinancing. Student loan refinancing involves you combining your existing student loans into a new one with a lower interest rate. You can save on your student loans significantly when you have a lower interest rate.
Select a variable rate loan
Variable student loans usually have lower interest rates, unlike fixed student loans. This means that with a variable interest rate, your interest rate can change during repayments. In a rising interest rate environment, the variable interest rate can be very expensive, but in a falling interest rate environment, the interest rate decreases.
Have a good credit score
Having good credit is an excellent way to get a lower interest rate. A borrower with strong credit is seen as responsible and low risk. If you want to increase your credit score, you have to start by paying back your loans on time.
Have a co-signer
You can apply for student loans with a qualified co-signer even if you have bad credit. This co-signer has to have a good credit score and an income that will assume accountability of the refinancing of your student loan. This way can help you get a lower interest rate as well as refinancing approval.
If you are having trouble keeping up with your student loan payments, you have options. Enlist the help of a skilled, knowledgeable attorney. Elias Dsouza has the knowledge and experience to guide you through the student loan modification you deserve. Contact Elias today for a free consultation.