Understanding Interest Rates on Student Loans

March 25th, 2013 by Ben Cohen

interest rate149070729Coming to college in the United States involves a lot of expenses, and you may find yourself turning to a private loan to help you meet the financial burden. While loans can be great, it is important to understand the full financial burden of repaying them. One of the most important factors in picking a loan to help you finance your college education in the United States is understanding interest rates on student loans.

Interest is a fee that a bank requires you pay on top of the base loan amount so it can make money from the loan. Interest rates on student loans are given as yearly percentages. For example, a $1,000 loan with an interest rate of 7.5% APR (annual percentage rate) will mean a total repayment of $1,075 after one year of interest.

Stretch this out across years – even decades – of repayment, and clearly interest rates on student loans can have a huge impact on how much you pay in total. So how can you make sure you lower your interest rates on student loans?

To a certain extent, interest rates on student loans are fixed. Student loan interest rates are based off parameters set by reputable American and international banks and generally vary between about 2% and 9% APR.

But your student loan interest rates will also change based on the creditworthiness of your US cosigner. A cosigner is a financially responsible person who, by cosigning a loan, agrees to cover any costs that the original borrower can’t. Find a cosigner with a solid credit history (as an international student, you’ll need a cosigner in the US anyway) and banks will be more likely to give you a favorable interest rate on the loan.

Another way to lower the overall impact of interest costs is to repay your loan more quickly – thereby accruing less total interest. This can mean anything from paying a little more than the monthly minimum when you have the spare cash to choosing an official repayment plan that features earlier or more substantial regular payments.

Understanding interest rates on student loans is very important part of your college financing, so make sure to look into your best options before you decide on a loan!

4 Comments

  1. Tesfamariam says:

    so how can any international st
    udent get this chance? couse i gues it is realy hard to find other way to learn in USA

  2. Bryanna Lindblom says:

    Hi Tesfamariam,

    International students interested in obtaining a loan for their studies are able to start by using the comparison tool. From there, they can select the lender that will best fit their needs.

    I hope you find the aid you are looking for!

  3. kasye Mengistkasyemeng@gmail.com says:

    i want to get free scholar ships from any USA so please give me scholar ships

  4. Bryanna Lindblom says:

    Hi Kasye,

    Thank you for your inquiry. You can find more on international scholarships here or more on international loans here.

    Best of luck finding the aid you need!

Join the conversation