Lower Student Loan Interest Rates Guide
If you already have a private student loan, there are still several strategies you can use to bring down your interest rate — though some may require patience. For instance, building a stronger credit score can take a few years. However, you may be able to reduce your rate sooner by applying with a reliable co-signer, selecting a shorter repayment period, using lender loyalty benefits, or simply requesting a lower rate through negotiation.
Millions of students rely on loans to finance their education. Unfortunately, whether the funds come from a private lender or the U.S. Department of Education, every student loan includes interest charges.
A higher interest rate can significantly increase your total repayment cost, sometimes adding thousands or even tens of thousands of dollars to your loan. On the other hand, securing a lower rate can reduce your monthly payment or help you pay off the loan more quickly.
Your available options depend on whether you currently have federal loans, private loans, or a mix of both. Still, with so much money at stake, exploring ways to lower your interest rate is always worthwhile.
Ways to Lower Student Loan Interest Rates
Borrowers with private student loans generally have more opportunities to reduce their interest rates than those with federal loans. Private lenders may allow you to secure a lower rate at the time you take out the loan or offer options to reduce your rate later while you’re already making payments.
Federal student loan interest rates, however, are determined by Congress and cannot be negotiated. While you can’t adjust the rate upfront, certain strategies may help lower your overall costs once repayment begins. Still, for most students, federal loans typically offer lower starting interest rates than what they might qualify for through private lenders.
No matter which type of loan you have, many interest-reducing strategies benefit all borrowers. That means these steps are still worth taking—even if your loans are federal.
1. Improve Your Credit Score
You can qualify for a student loan even if you have a low credit score. In fact, federal student loans don’t require a credit check at all. The only exception is federal PLUS loans, which review your credit history simply to confirm you don’t have significant negative marks—your actual credit score doesn’t influence your approval or interest rate.
Private lenders, however, rely heavily on credit scores. Borrowers with average or fair credit can still get approved, but they usually receive much higher interest rates. To secure the lowest possible rate, you’ll need strong—ideally excellent—credit. If your score needs improvement or you haven’t built credit yet, now is the time to start.
Begin by reviewing your credit report to identify problem areas. Once you know what’s hurting your score, you can take steps to fix it. For example, catch up on any overdue payments and work on reducing high credit card balances. A good rule of thumb is to keep your utilization below 30% of your credit limit.
If you’re a teenager establishing credit for the first time, getting a part-time job is a great first step. While income doesn’t directly factor into your score, it strengthens your financial profile. Next, open a teen-friendly checking account and a high-yield savings account, and consistently save a portion of your earnings. You might also ask a parent or guardian to put one or two bills in your name to help you demonstrate responsible payment behavior.
When you’ve saved enough—or with the help of a trusted adult—you can open a secured credit card. Use it sparingly and pay off the full balance every month to quickly build a positive credit history.
Throughout your credit-building process, tools like Credit Karma or Credit Sesame can help you track your score and provide personalized suggestions to improve it.
Rebuilding or establishing credit isn’t instant. Negative marks such as late payments, missed payments, or defaults may take two to seven years to disappear from your report. But the earlier you start taking action, the sooner you’ll qualify for better loan terms and lower interest rates.
2. Make Automatic Payments
One of the simplest ways to reduce the interest rate on your student loans is by signing up for automatic payments. This benefit is available for both federal and private loans.
All federal loan servicers—and most private lenders—offer a 0.25% interest rate discount when you enable autopay.
While a quarter-percent reduction may seem small, it can lead to meaningful savings over time. For example, if you take out a $40,000 loan at a 6% interest rate, switching to autopay and reducing the rate by 0.25% could save you around $600 in interest throughout a 10-year repayment term. That’s essentially the value of one full monthly payment.
Autopay is easy to set up and accessible for nearly every borrower. It also helps you stay on track by preventing missed payments and avoiding late fees.
Just make sure your bank account always has enough funds to cover the withdrawal—otherwise, you may face overdraft fees from your bank.
3. Pay Your Bill on Time
Some lenders provide additional incentives to borrowers who show responsible financial behavior.
For instance, MPower Financing—a private lender known for helping international students—offers a 0.5% interest rate reduction after making six straight on-time payments through autopay. This benefit is on top of its existing 0.5% autopay discount.
Most lenders, however, don’t automatically lower your rate just because you make timely payments. Even so, consistently paying your loan on time strengthens your financial profile. Over time, this reliability can give you leverage if you decide to ask your lender for a reduced interest rate in the future.
4. Refinance Private Loans
Refinancing allows you to replace your existing student loans with a new loan that offers a lower interest rate, better repayment terms, or both. To qualify, lenders generally expect a solid credit score (typically in the high 600s or above), steady income, and—most of the time—a completed degree.
That said, recent graduates often find it hard to qualify for the best rates because they haven’t built strong credit or secured higher-paying jobs yet. Borrowers who have been in the workforce longer and have had time to improve their financial standing usually receive the most competitive offers. Lenders reward strong financial profiles with lower rates because they view these borrowers as less risky.
The lowest available refinance rates are usually variable rates. However, these come with risk—variable rates move with market conditions, meaning your rate could rise over time, even if it starts low. Choosing a variable rate is essentially betting that it won’t climb higher than a fixed rate you could lock in today.
Before choosing a variable loan, research current private student loan rate trends. Compare this year’s average rates with previous years to see whether rates are rising or falling.
- If rates are currently high, a variable rate may help you take advantage of potential declines.
- If rates are unusually low, locking in a fixed rate is usually safer.
For example, during the 2020–21 academic year, rates were at historic lows after the Federal Reserve implemented emergency measures during the pandemic. With predictions that rates would increase afterward, many borrowers benefited by locking in low fixed rates.
The good news is that you can refinance your student loans multiple times as long as you qualify. Most refinancing lenders don’t charge origination fees, so applying again later—after improving your income or credit—can help you secure even better terms.
While federal loans can be refinanced, doing so converts them into private loans. This permanently removes valuable federal protections and benefits such as:
- Income-driven repayment (IDR) plans
- Federal student loan forgiveness programs (including PSLF)
- Deferment and forbearance options
- Strong borrower protections, such as disability or death discharge
Because of these trade-offs—and because federal rates have been relatively low over the past decade—refinancing federal loans is rarely advisable unless your interest rate is particularly high and your credit is exceptional.
However, if you have private student loans, refinancing is often an excellent choice. There’s no downside if you can secure a lower interest rate or better terms.
To find the best deal, compare offers from multiple lenders. Tools like Credible make this easier by providing prequalified rates from several lenders without impacting your credit score.
5. Apply With a Co-Signer
Private lenders determine refinance loan interest rates based on factors such as your credit score, credit history, and income. If your personal financial profile doesn’t qualify you for the lowest rates, applying with a strong co-signer can significantly improve your chances.
A co-signer with excellent credit or a higher income can help you secure better terms because the lender views the loan as less risky when another financially stable person guarantees it.
However, co-signing comes with responsibilities. Your co-signer becomes equally liable for the loan—any missed or late payments can harm their credit history, and if you default, the lender can pursue them for the remaining balance.
Many lenders offer co-signer release programs, which let you remove your co-signer from the loan after you’ve made a required number of on-time payments—often around 36 months. This allows you to benefit from their support early on while eventually taking full ownership of the loan.
6. Choose a Shorter Repayment Term
If your budget allows, selecting a shorter repayment term is an effective way to secure a lower interest rate. Many refinance lenders offer terms as short as five years—half the length of the typical 10-year federal repayment plan.
Lenders usually provide lower rates for shorter terms because these loans carry less risk. You’re in debt for a shorter period, which reduces the chance of default. For fixed-rate loans, shorter terms also protect lenders from being locked into a low rate for too long, particularly if market rates rise in the future.
However, choosing a shorter term means your monthly payments will be higher. Paying off the same loan balance in less time requires larger payments, even though the interest rate is reduced.
For example, borrowing $20,000 at 6% interest would cost you about $222 per month on a 10-year plan. Refinancing the same amount at 3% interest on a five-year term would save you $5,083 in interest, but your monthly payment would rise to about $359.
This strategy can lead to substantial savings, but only if you’re comfortable with the higher monthly payment. Always calculate your budget carefully before switching to a shorter loan term.
Although you can’t directly lower the interest rate on federal student loans by choosing a shorter term, paying them off faster still saves you significant money. The longer you take to repay, the more interest accumulates.
For instance, repaying $40,000 at 6% over 10 years results in about $13,290 in interest. Stretching the repayment to 20 years increases the total interest to $28,777—more than double.
7. Take Advantage of Loyalty Discounts
Some lenders—particularly those that offer multiple financial products—provide loyalty discounts to reward existing customers. These discounts are typically offered to borrowers who already hold another account with the lender, such as a checking or savings account, or who have an existing loan relationship.
When comparing refinance options, look for lenders that offer this additional perk. Loyalty discounts are usually applied in addition to the standard 0.25% autopay reduction, helping you save even more.
For example:
- Citizens Bank and Laurel Road both offer a 0.25% interest rate discount for customers with qualifying accounts.
- SoFi provides a 0.125% discount for borrowers who already have another loan with them.
Exploring these types of offers can help you secure a lower rate and reduce the total cost of your student loans.
8. Negotiate With Your Lender
While federal student loan terms are fixed and non-negotiable, private student loans offer more flexibility—including the ability to negotiate.
A good starting point is to compare rates from other lenders. Once you’ve gathered a few competitive offers, contact your current lender and ask whether they can match or improve upon those rates. Many lenders are willing to negotiate to retain reliable customers.
Negotiation can also help if you’re struggling to make payments. Even if you don’t qualify for refinancing—especially if you’ve missed payments or are in default—you may still have options. When lenders believe they may not recover the full balance, they’re often more open to working with borrowers to minimize losses.
Be upfront about your financial situation and explain what you can realistically afford. While negotiating with lenders can be challenging, it may lead to a reduced interest rate, temporary relief, or even a settlement. In some cases, borrowers have been able to stop interest from accruing and settle their debt for significantly less than the full amount.
Key Takeaways to Slash Your Student Loan Interest Rates
Lowering the interest rate on your student loans can save you thousands of dollars and help you pay off your debt faster. Whether you focus on improving your credit score, setting up automatic payments, refinancing, or negotiating with your lender, taking proactive steps can make a significant difference over the life of your loans. Even small reductions—like loyalty or autopay discounts—add up over time. By exploring these strategies and choosing the options that fit your financial situation, you can take control of your student loan repayment and reduce the long-term cost of borrowing.
