When it comes to paying for higher education the majority of students require student loans. Studies show that in some states up to 75% of bachelor’s degree recipients graduate with some student loan debt. The average debt is around $30,000 per borrower.
Given these numbers, you know you’re not alone. Still, you want to get the most out of the money you borrow. Let’s find out how.
Money You Buy
You don’t need someone to tell you that you can’t order out pizza every night. Still, there are ways to optimize your borrowing in ways you might not have considered. Taking out a student loan is like buying money. You want to spend as wisely as possible, but you also want to buy it as cheap as you can. Basically, this means getting the lowest interest rate possible.
Interest rates might also affect how much you end up borrowing. For example, if you take out a loan of $30,000, different interest rates might stack up like this:
- At 7% over 120 months, you end up paying $41,799 total.
- At 4% over 120 months, you end up paying $36,448 total.
See the difference? Now let’s say you are willing to pay back $41,799. Then at 4% over 120 months, you could take out a bigger loan for $34,400 giving you an extra $4,400 to cover costs. In the end you still pay back the same amount, but more goes into your pocket. That’s the power of lower interest. Of course, you want to borrow as little as possible, but a lower interest rate can offer you some wiggle room.
How to Get The Best Student Loan Interest Rate
The only way to get the best rates is to shop around. Thankfully, there are modern ways to do this that make the process easy. In the past, you had to go door-to-door asking each lender separately. This meant a lot of forms to fill out and a lot of time.
Today, the web based multi-lender marketplace has streamlined the process big time. These platforms have established connections with many lenders so you don’t have to go door-to-door. All you do is answer a few questions online about your situation. In minutes you have several prequalified rates at your fingertips. Once you have the interest rates, making the choice is pretty easy.
Other Relevant Data
Online marketplaces can also help you gather other data about lenders that might be important. For instance, if two companies offer you the same rate, how do you decide? Other influential factors might be:
- Minimum loan amount – The least amount you can borrow.
- Maximum loan amount – The largest loan they offer.
- Terms – The time you have to pay back the loan. The loan amount may affect this.
- Eligibility – Some companies only lend to students enrolled at least half-time.
- Co-signer – You may or may not need someone to co-sign for your loan.
- Benefits – Can include interest rate reduction if you authorize autopay.
- Deferment period – Determines when you have to start paying back the loan.
Getting the most out of your student loan doesn’t mean you have to eat ramen noodles every night. Instead, use the tools available and make smart borrowing decisions.