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How to Find Low Interest Student Loans

When it comes to paying for the rising costs of tuition, student loans are the vehicle of choice for many college students. If you are going to be borrowing money from a student loan lender to pay for college or medical school education, you need to minimize the amount of interest that you pay for this loan. Otherwise, you’ll end up paying a lot more than you should for the money that you borrow.

Federal Loans

If you are interested in saving money on interest, you need to consider federal loans. Federal student loans are issued directly from the Department of Education to students. These loans come with interest rates that are below the market and cheaper than private student loans.

One of the most commonly used federal student loans is the Stafford loan. When you apply for a Stafford loan, you’ll be required to include a Free Application for Federal Student Aid. This is an application that provides the government with detailed information about your finances and the financial situation of your parents. This way, the Department of Education can determine if you are eligible for a subsidized or unsubsidized Stafford loan. If they determine that you have a big financial need, you can qualify for a subsidized Stafford loan. These subsidized loans come with lower interest rates and vary at 3.4% – 4.5% than unsubsidized once vary at 6.8%. While you are in college, you won’t have to pay the interest on your loan because the government will actually subsidize those payments for you.

Another option that you have is the Perkins loan. These loans are only given to individuals who can demonstrate a financial need. They also come with very low interest rates vary at 5.0% and they don’t require you to make interest payments while you’re in school.

PLUS loans parent student loans are another option of federal educational loans that must be applied by the student’s parent and come with low interest rate vary at 7.9%, a little bit higher than Subsidized Stafford Loan and the Perkins Loan, as these both have extremely low interest rates.

Private Loans

If you do not get all of the money that you need for school through federal student loans, you may want to consider getting private school loans. Private loans are issued directly from private lenders instead of from the federal government. These types of loans are approved based on how much money you make and your credit history. The interest rate is also based on your credit history. Presupposition to get this kind of student loan is to have an excellent credit profile, a solid employment history with stable income, some types of collateral and a significant downpayment or a cosigner.

If you want to save money on education loans from private lenders, you need to do your best to make yourself look like an attractive borrower. You can do this by getting your credit history in order before you apply. If you can come up with a strong and creditworthy cosigner or co-borrower for your loans, this may also provide you with cheaper interest rates. For instance, if you can get one of your parents to cosign a loan with you, and your parent has good credit, this can give you a cheaper loan, or need to consider to get private education loan without cosigner requirement.

Making it Work

As a general rule, you should try to get as much money as you need from federal student loans before pursuing other options. They have the lowest interest rates and the easiest approval standards. From there, you can use private student loans to fill in any gaps in funding but need to consider also some loan fees, and other finance charges.

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