Whenever you borrow money you have to pay for the favor. That payment is in the form of interest rate. Student loans charge different Interest Rate depending
on many factors like: student loan type, type of lender, borrower credit worthiness, and market conditions. The interest on these loans is
one of the costs charged to you.
The most important student loan is the one with lowest interest rate.
Student Loans Quick Link List:
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Interest Rates Overview
In general Federal Student Loans have the lowest rates. Private Student
Loans charge higher interest rates, and Peer to Peer Loans along with
Personal Loans have the highest interest rates. There are exceptions, so make sure to
Apply and compare before you borrow anything.
Interest rates on Federal Student Loans are
locked. For Private Student Loans students must Apply
in order to know the exact rate.
Federal Loans
Interest rates on variable federal student loans are set by Congress. They are fixed and vary slightly from loan to loan.
Parents pay a little bit more when taking out Federal Parent PLUS Loans.
Private Loans
There are no hard rules for interest rates on Private Student Loans. Those rates range from 8% all the way up to 14%.
Private Student Loans are mostly based on the London Interbank Offered Rate (LIBOR). The LIBOR index is variable and adjusted quarterly.
The "Variable Interest Rate" is equal to the current three-month LIBOR Index plus or minus a Margin. The Variable Rate may change based on the three-month London Interbank Offered Rate ("LIBOR"),
which is updated each quarter (January, April, July and October) as published in The Wall Street Journal on the fifteenth day of the month preceding each calendar quarter, rounded to the nearest
one-hundredth percent (0.01%).
Peer to Peer Loans
Peer to Peer Loans are very similar to Private Student Loans. They are
both private to be exact, but Peer to Peer Loans come from private individuals and not necessary banks or institutions. The rates
could be a little higher than rates on Private Student Loans and they are in the rage of 7% - 25%.
Personal Loans
Personal Loans also charge more for borrowing, because these loans are not secured by any assets. When borrowing money using these loan be prepared for rates in the range of
7% - 19%.
Fix Rates
When we talk about fix interest rates we refer to the loan rate over a period of time. For the length of the loan the rate does not change. It is fixed and the loan
payment can not increase due to interest rate changes in the marketplace.
Variable Rates
Variable interest rates vary depending on market conditions. Student Loans with variable interest rates during high
rate period are good, because chances are the rates will come down and you will have to pay less.
Interest Rates Reduction
The federal government has reduced Interest Rates on
Federal Stafford Loans Subsidized. The reduction allows borrowers to make smaller payment on their
student loans. Only loans made after July 1, 2008 will be eligible for the reduction. Please visit our Interest Rates Reduction center
for full details.
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Student Loan Tips |
Q: Take Out Student Loans As The Last Resort
When you try to get all types of Financial Aid and you do not receive anything or if the amount of money is not enough try borrowing money by taking out loans.
Q: Save Money On Repayment
If you ever are in a position to make an over payment on your loan without spreading your finances too thin, absolutely do it.
Q: Apply For Student Loans On the Same Day
We are not sure if this tip is valid, but if you have to apply for more than one student loan (different banks) do it on the same day. This will prevent the second bank to see your first loan on the credit history and it will be easier to get qualified.
View All Tips
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Important Questions |
Q: Is the interest tax deductible?
Most people can deduct interest paid on Federal Student consolidation Loans. Consult your tax advisor for more information.
Q: Which loan provides the lowest rates?
The Federal Perkins Loan has the lowest interest rate of 5%, as it was designed for students with exceptional financial need.
Q: How is the interest rate determined?
The interest rate is determined by taking a weighted average of the interest rates on all loans to be consolidated and rounding up to the nearest 1/8 of 1% or 8.25%, whichever is less.
View All Questions
Interest rates vary by student loans program and by lender. On top of that, interest rates for your private student loans will be based on your credit worthiness.
Credit History is required for your private student loans. For quick looked to see
what the interest rates are by loan check out Interest Rates Center.
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