Lowest Interest Rates Student Loans

This video explains how student loans work, and how they fit in the larger financial picture. Students graduate from college having taken out thousands of dollars in debt – far beyond what many ever imagine. But if you know where to look, there are tax-deductible ways to pay off that debt right now. And, if you’re really good at looking, you’ll discover a way to reduce your monthly payments considerably…

Lowest Interest Rates Student Loans

Here’s where we give our top picks for the best student loan interest rates!

For students who have a good credit score (FICO 760+), our recommendation is to use the federal government’s Direct Subsidized Loan Program. It comes with no prepayment penalty or income-based repayment options.

This program offers the lowest rate of 5.66% APR. However, they do not offer any type of forgiveness programs for those who work at least 10 hours per week while enrolled in school.

If you don’t qualify for the direct subsidized loan program, then we recommend the unsubsidized Stafford Loan. You’ll save about 0.25% APR compared to private banks and lenders. This option works great if you plan to pay off your student loans early. Of course, you will need to pay back your loans before you graduate.

But what happens if you don’t make payments? If you fall behind on repaying your loans, you’ll be subject to a number of fees including late payment charges, collection costs, and even bankruptcy levies.

The third option is called the Grad PLUS Loan. This loan is only offered to undergraduate students, recent graduates, parents of current college students, and certain veterans.

You can get this loan for up to $31,000 at 3.86% APRCustomers will want to compare all three options since their financial situation may vary. But as a general rule, here’s how each option stacks up compared to each other:

Direct Subsidized Loan – 2.6% APR vs. 4.21% APR; $0 down payment vs. 3.35% down payment

Unsubsidized Stafford Loan – 3.84% APR vs. 6.41% APR; no down payment required vs. 3.20% down payment

Grad PLUS Loan – 3.86% APR vs. 8.51% APR; $3,200 maximum limit vs. $23,000 maximum limit

Lowest Interest Rates Student Loans

Federal Direct Subsidized Loans

-Direct subsidized loans (DSL) are government backed student loans offered directly to students. You can get these at low interest rates and usually have no credit check, however they are not eligible for consolidation.

Direct Unsubsidized Loans

-Unsubsidized direct loans are private loan programs that do have a credit check. These are the lowest interest rates out there and can be great if you need them fast. However, the rate you receive may vary depending on your credit score and the amount borrowed.

Federal Parental PLUS Loan

-The federal parent plus loan program was created to help parents finance their children’s higher education costs. Parents borrow money to cover the cost of college tuition, room, board and books. The federal government pays back a portion of the loan, but this comes at an interest rate higher than standard student loans.

Private Educational Loans

-Private educational loans are similar to unsubsidized direct loans because they are not guaranteed by any federal government agencies. Unlike subsidized loans, private loans generally have higher interest rates, require credit checks, and can take longer to pay off.

Consolidation Loans

-Consolidating your debt means combining multiple different debts into one. For example, consolidating your student loans could mean combining all of your federal and private loans under one plan and paying over time with one monthly payment.

Refinancing Your Debt

-Refinancing your debt includes getting a smaller rate on your current loan balance. This would only be possible if interest rates go down. If you refinance now, you might be able to lower your interest rate by 0.25% or more. Keep in mind that refinancing requires good credit history and a solid FICO score.

Income Based Repayment Plans

-Income based repayment plans allow borrowers to make payments based on what they can afford instead of their income. Payments will vary based on your credit score and loan type.

Lowest Interest Rates Student Loans

Federal Direct Loan Program (Direct Subsidized)

The federal direct loan program offers loans at fixed interest rates subsidized by the government and available for any type of education. These loans have low annual payments, however, they do not cover the entire cost of college. There are two types of federal direct student loans: unsubsidized and unsubsidized.

Parent PLUS Loan Program

Parents borrowing money under this program use their own credit and co-sign for their children’s loans. Because parents do not borrow directly, they pay higher interest rates than students who borrow from the government. Parents may also need to get their income verified before getting approved.

Perkins Loan Program

This program gives out smaller loans that are paid off after 10 years instead of 15 years. Students can only receive loans based on financial need. Students must fill out FAFSA forms, and schools are given priority depending on what fields they choose. A high school diploma or GED certification is enough to apply for these loans, however, some schools now require ACT/SAT scores or transcripts as proof of academic achievement.

FFEL Program

These loans are issued to those enrolled in career training programs. While these loans have longer repayment terms, they have lower monthly payments than most other loans. Repayments can take up to 30 years, but if borrowers make timely payments, then the total amount owed will decrease over time. Most universities offer specialized vocational degrees known as certificates that can help borrowers qualify for these loans.

William D. Ford Direct Loan Program

Most colleges provide different types of scholarships to help students finance their tuition fees. The William D. Ford Federal Direct Loan Program provides loans to students whose families cannot afford to fund them. However, students must meet certain requirements before receiving these loans and complete a FAFSA application.

Stafford Loan Program

Students who attend public colleges and private nonprofit institutions can apply for Stafford loans. Unsubsidized Stafford loans carry higher interest rates, and can be used for undergraduate and graduate studies. Eligibility requirements depend on the borrower’s status as a dependent and how much funding he or she receives from financial aid.

Grad Plus Loan Program

Graduates from public and private non-profit institutions can apply for this loan. Unlike student loans, grad plus loans are not guaranteed by the U.S. Department of Education. Borrowers must show that they have graduated from an eligible institution with a bachelor’s degree or higher.

Lowest Interest Rates Student Loans

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