Top Facts to Know About Student Loans Interest Rates
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UPDATED: Sep 12, 2011
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Perhaps the greatest advantage of student loans over other types of loan agreements is the ability of students to secure lower interest rates to help pay for tuition, room and board, books and other expenses related to education. Finding the best possible interest rates often requires a combination of filing paperwork with the government, such as through the national FAFSA financial aid form available online, along with researching supplemental private loan rates from individual lenders.
Many federal student loans carry a fixed rate determined annually, with common rates falling between three and eight percent. Private student loans, on the other hand, typically base interest rates on the London Interbank Offered Rate, or LIBOR, combined with a lender-specific percentage that may be as low as two percent or as high as 10 percent. The interest rates on such loans vary not only in terms of the economic climate, but also upon the individual credit and income situation of the borrower.
Interest rates for student loans are also affected by the repayment plan associated with the loan itself. While some loans are repaid only after a student has graduated, dropped out of college, or has taken on a part-time course load, others can be repaid shortly after disbursement. Loans may carry smaller interest rates while a student is in school, and making payments during this period can lead to significant interest discounts.
Discounted student loan interest rates may also be available from private lenders who offer other products such as bank accounts, by making consecutive payments on the loan without any late installments or from enlisting the assistance of a co-signer to help shoulder the responsibility of repayment.