One of the common questions we get here at the StudentLoanDown blog is, “Can I lower my student loan interest rate?”
Whether you’re looking to lower your monthly payment because you can’t afford it or are just interested in decreasing the total interest paid to your lender, below is beneficial information about lowering interest on student loans.
When student loan borrowers sign their
promissory note agreeing to pay back the loan, they are also agreeing to the interest rate detailed in the contract. For some student loans this will be fixed, but for others it will be variable (a margin that is later added to a base rate). Federal student loans made after the date of July 1, 2006, have fixed interest rates. Many private student loans provide both variable and fixed interest rate options.
Your promissory note serves as a lock, bolting down the terms on your loan (including interest rate or rate margin). Unfortunately you aren’t able to “refinance” a student loan the way you can with other consumer credit products, but there are certainly options to lower your monthly payment and reduce the amount of interest you’ll pay over the life of the loan.
Quick tangent: For those of you still in school and are wondering how to pay for college, it’s important to be proactive when thinking about student loans and student loan payment. By using the Wells Fargo student loan calculator, we can help you plan out the road ahead to understand what you’re borrowing at what rate, so you don’t find yourself unable to make student loan payments later. End tangent.
Now, let’s talk about the options.
Consolidate: When it comes to student loan consolidation, you may end up reducing your current monthly student loan payment by extending your repayment period. However, that means you would actually end up paying more for the loan’s lifespan than if you continue paying just the original monthly loan amount. If you’re looking for some payment relief and are willing to pay more (or make higher payments later to avoid accruing additional interest), student loan consolidation could be the answer. Consider using Wells Fargo for a Private Student Loan Consolidation.
Pay off the debt: Some borrowers might consider using a different consumer loan (personal, home equity loan, etc, depending on the assets) to break even with their student loan payment. This option has a couple substantial things you may want to consider. You would end up losing several benefits of student loans like deferment and forbearance options, as well as the potential tax deduction.
Get the debt forgiven: There are some federal student loan programs that will forgive a certain amount of a student’s student loan debt. There is a federal loan forgiveness option available to students working in public service that can help many straighten out their student loan payments.
Use borrower benefits: Another potential option is to ask your lender if they offer any benefits that could reduce your student loan interest rate. For example, some lenders offer a discount if you make your payments automatically.
Though it may seem like a long complicated road to freedom in regard to your student loan interest rate, the aforementioned options will help you in potentially lowering that interest rate the best and easiest way for you.