How to Reduce Student Loan Rates

For some, student loans are a necessity. While you're still in school, the amount you have to pay back later doesn't seem like much, but when you're facing your first bill on an entry-level salary, you'll start to wonder how you'll ever pay it all back. There are now several ways to reduce your rates on student loans, and even your payments, just by taking a couple of hours to do a little research and make some phone calls. Soon you'll be facing a smaller payment each month, and you can look forward to the day you have a zero balance on your loans.

Instructions

1

Research grants and scholarships before looking into financing your education with student loans. There's a lot of money available for students, and some schools will put a cap on how much you can borrow, or will help you find grants to pay for schooling. The less you borrow before leaving school, the less you will have to pay back.

2

Consolidate your loans after graduating. A lot of students have multiple loans with different lenders at different interest rates. Consolidating your loans can reduce the interest rate and your monthly payment. Federally funded student loan consolidators tend to have lower interest rates than private consolidators, so use a debt calculator to compare.

3

Research loan forgiveness programs. One program, the Public Service Loan Forgiveness program, will forgive loans after 10 years of full-time public service employment, and at least 120 payments. There are also other loan forgiveness programs for members of the military or the Peace Corps, as well as for teachers and medical or legal workers.

4

Look into direct debit repayment. Lenders will often reduce interest rates if they can direct debit your bank account, since this will give them assurance that you'll pay on time every month.

5

Pay off a little more than you owe each month if you can afford it. Lenders will estimate a repayment plan based on a fixed repayment period, so paying a little more each month will reduce your loan faster. You'll also pay less in interest this way.

6

Apply for income-based repayment. Based on your income, lenders will cap monthly payments at below 15 percent of your monthly income. This does increase your interest rate in the long run and adds to the amount of time it takes to pay off your loan, but it will keep your loan manageable for the first couple of years.