Student Loan Interest Rates
A student loan is the money given to students by the government or a private financial institution in order to help pay for college tuition and other related expenses. The main difference between a student loan and other types of loans is the low interest rate – student loans have remarkably low interest rates, sometimes as low as 3%. Whether you are considering an undergraduate degree or a graduate course at university – student loans are a great way to finance your education. Student loans ensure that the cost of your tuition is covered allowing you to better concentrate on your studies and excel in your field. Low interest rate student loans allow you to invest in an education that ensures great returns, and a stable, successful future.
Current Interest Rates
Current federal student loan rates for the 2015-16 academic year are as follows:
- Direct Subsidized Loans (Undergraduate Students) are fixed at 4.29%
- Direct Unsubsidized Loans (Undergraduate Students) are fixed at 4.29%
- Direct Unsubsidized Loans (Graduate Students) are fixed at 5.84%
- Direct PLUS Loans (Parents and Graduate or Professional Students) are fixed at 6.84%
- Perkins Loans are fixed at 5%
Since interest rates for private loans are entirely at the discretion of your lender, there are no fixed statistics for private school loans interest rates.
What are the benefits of low interest student loans?
Low interest rates student loans have a number of benefits. Contrary to popular belief, the interest on your loan starts to accumulate as soon as the loan is issued, not after you graduate. This means that the amount you owe keeps increasing while you are still in college. A low interest rate means a smaller increase in the total amount you owe, making it easier to pay back the money you borrowed. However, student loan rates do fluctuate, going up or down with the market. Fixed interest rate loans on the other hand, as their name suggests, are issued at certain rates that stay the same while the loan is paid back. These distinct advantages make low interest student loans and fixed rate student loans the top choice for students around the country.
How do I apply for student loans at the best rate?
If you are considering obtaining student loans at low interest rates, it is important to thoroughly research your options and know the ins and outs of each loan. You can compare most loans online quite easily, and learn their particular advantages and disadvantages. Once you have decided which loan you would like to obtain, you can then start the application process. The application can be submitted online or by phone, and is usually processed the same day. After your application is approved, the funds are generally issued within twenty four hours. Low interest rate student loans are a great way to finance your college education and turn your dream of a better, happy life into reality.
Calculating Your Accumulated Interest Rate
You can calculate the amount of interest that has accumulated on your loan by using a simple formula, which includes multiplying your remaining loan amount with the number of days since you made the last payment and the interest rate factor. The interest rate factor is basically your interest rate divided by the number of days in a year.
Interest Rates and Repayment Plans
Your school loan interest rate may be constant, but the total amount of interest that you may end up paying will depend on the repayment plan you choose. For instance, if you have borrowed a Direct PLUS federal loan of $50,000 (with a fixed interest rate of 7.9%), you will pay the following amounts according to the repayment plan chosen by you:
Standard Repayment Plan
- Total Loan Payment: $72,480
- Total Interest Payment: $22,480
Extended (Fixed) Repayment Plan
- Total Loan Payment: $11,4780
- Total Interest Payment: $64,780
Fixed interest rates do not change throughout the loan term. On the other hand, for variable interest, the rates are subject to change. Students should apply for federal loans, as they come with fixed interest rates. These loans are more secure and offer more protection for the borrower. Note: private lenders offer both fixed and variable interest rates.
What are student loan consolidation interest rates?
Consolidating loans means combining multiple loans into one, which typically reduces multiple payments into one, and also lowers the interest rate. The interest rate on a federal consolidation loan is the average of the interest rate on all the loans. It is then rounded up to the nearest 1/8 of a percent.
What is a good interest rate on student loans?
The best private student loan interest rates lie somewhere between LIBOR + 2.0% or PRIME + 0.50% with no hidden charges. However, the problem with loans offering such amazing rates is that they are available only to borrowers with great credit history or someone with a credit-worthy cosigner.
How should I compare student loan interest?
There are many private lenders out there so making a choice might feel a bit overwhelming. When choosing a lender, it’s wise to look at other characteristics of a loan rather than just the interest rate. Use our Comparison Tool, which will allow you to compare different lenders and their various loan features side-by-side.
How can I lower the interest on my student loans?
You may be able to lower your interest rates by consolidating your loans. Loan consolidation means combining all loan payments into one single monthly payment. Consolidation reduces the hassle of multiple payments and may also bring down the interest rate, making repayment much more affordable. There are a number of consolidation agencies, both federal and private.
Are interest rates lower on federal student loans?
Student loans that are provided by the federal government usually have lower low interest rate, as they are based on need and are provided to students regardless of financial status. The main eligibility requirements for these loans is a reasonable demonstration of financial need.
When does interest begin to accrue on my PLUS loan and when is interest capitalized?
Interest begins to accrue as soon as the first disbursement is made. Interest is capitalized when the accrued interest is added to the loan principal. Interest capitalization typically occurs when loan repayment begins and after periods of deferment or forbearance.
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