How to Lower the Interest Rate on a Student Loan

High student loan rates are a budget killer, jacking up your monthly payments while you barely make a dent in the principal. While it isn't possible to “shop” for a new rate as you would with a mortgage or credit card, there are a few tricks for lowering student loan interest rates. In fact, programs offered by both your lender and the federal government can help you lower your interest, your payments, and maybe even eliminate some of your principal.

Enroll in your lender's "borrower benefits" program. These programs can lower your interest rate if you meet certain conditions, such as making on-time payments for several years, or making your payments via electronic fund transfer. Call your lender or visit its website to get the scoop on its offerings.

Consolidate your student loans at a lower interest rate. This option has its pitfalls: First, you need to make sure that your new interest rate is lower than the rate you already have. Second, even though you get a lower interest rate and monthly payments, you'll end up with a longer payment term. The longer you have the loan, the more money you'll pay, even at a lower rate. The only way to avoid this is to speed up your repayment by making higher monthly payments.

Pay off your student loan using another line of credit that has a lower interest rate. This is a risky option--you'll give up a lot of the protections that come with federal student loans, such as the right to delay payments if you become disabled, lose your job, experience financial hardship, or return to school.


  • If your payments are unmanageable, ask your lender for help. You may qualify for an income-based repayment plan that significantly lowers the minimum payments required of low- to moderate-income student loan borrowers.
  • You can get at least some of your student loan debt, both principal and interest, forgiven through the Public Service Loan Forgiveness program. You'll have to work in a public service job for at least 10 years and make 120 monthly payments on your student loans to qualify, but you can save a lot of money if you complete the program.

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About the Author

Lainie Petersen writes about business, real estate and personal finance, drawing on 25 years experience in publishing and education. Petersen's work appears in Money Crashers, Selling to the Masses, and in Walmart News Now, a blog for Walmart suppliers. She holds a master's degree in library science from Dominican University.