Student Loan Rate - How to find the best student loan rate
For the majority of students, education loans are the first large bit of financing that they undertake. This makes these loans very important, as they set the tone for your financial life to come. Though you might not be inclined to think about the student loan rate at the current time, you will definitely want the lowest possible rate when it comes time to pay off the loans. So how can students get the lowest possible student loan rate? That all depends upon the amount of money that students need to borrow and what sort of personal situation they are in.
Using government loans first
The federal student loan program is a great place to start if you want the lowest student loan rate imaginable. Though private lenders can also be quite useful, federal loans are sure to be low in interest, and the effective rate can be even lower when these loans are subsidized. Take the time to fill out the Federal Application for Student Financial Aid (FASFA). This will give you an idea of what loans you can undertake, including the federal Stafford loan, which comes with a rate of less than 7%. The government will allow students to borrow a significant amount of money under the federal loan program, so exhaust this before you look elsewhere.
Government loans can either be subsidized or unsubsidized, and this makes a huge difference. Subsidized loans have interest paid by the government while students are still in school or while students are unemployed. Unsubsidized loans accrue interest from the time they are issued. With either type of federal loan, students are not required to pay back the loans while in school, and they have six months following college where no payments are required. After that point, students must begin making payments or request a deferment in the case of unemployment or continuing education. It is important to note that students must remain full-time in college (typically 12 credit hours or more) to avoid loan billing.
Comparing private sources
Know that in almost every case, federal student loan rates are going to be lower than the private loan rates out there. This is a fact that students have come to accept, and it’s one of the reasons why you should choose the federal route first. With that being said, you should be willing to consider private loan sources for your extended costs. Private loans can be more flexible, since the money can be used for things other than tuition and fees.
When you decide on private funding, make sure that you take the time to compare all available companies. There are many players in this market, including Wells Fargo, Citi, and a few of the other large banks. Use the handy comparison sites that exist to find out which companies offer the lowest student loan rate and the best terms to go along with that rate. This will enable you to get the best possible deal.
On average, private student loans carry rates in the 10%-11% range, depending upon the student, that student’s credit situation (including family), and the size of the loan. It is difficult to pinpoint exact student loan rates for individual students, since so many different factors go into the rate calculation with private lenders. Like federal loans, private student loans typically do not have to be paid back until a student graduates. This is something that borrowers have to work out with lenders, though, as each company differs in what they have to offer.
Going in with a co-signer
Government loans typically have a set rate, regardless of what your credit history might be. As long as you are in good standing with the government on those loans, you can qualify for the low rate. Private loans, on the other hand, require much more attention to detail. They conduct the process similarly to how personal loan lenders handle rate assignment. This means that if you want a low student loan rate from private lenders, you might need to go in with a co-signer. If you have a family member with excellent credit and a long standing history, ask them to co-sign on the loans with you. This will ensure the lowest possible student loan rate that the company has to offer.
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