Five Facts About Student Loan Interest Rates

Get the information you need on college loan interest rates

When scouting colleges, it can be difficult to keep track of all the information you’re receiving. Student loan interest rates, though a crucial aspect of financing a college education, might not be top-of-mind when visiting a college campus or working through applications. Qualifying for a competitive college loan interest rate could lead to saving thousands of dollars over the life of the loan, which is why it’s important to compare rates before making a decision. Explore these five essential facts about interest rates for student loans to make a more informed decision about financing an education.

1. Student loan interest rates can be either fixed or variable

All student loans come with an interest rate, either variable or fixed, that will be charged on the principal of the loan. Fixed-rate student loans have rates that do not change throughout the life of the loan. Variable-rate student loans have rates that fluctuate based on the market interest rate. Many private lenders, including Citizens Bank®, offer borrowers the choice of either a fixed- or variable-rate loan. However, all federal loans come with a fixed interest rate. Some borrowers appreciate the fact that fixed-rate loans lock in the same rate for the life of the loan, which means they never have to worry about rates rising. Others prefer a variable-rate loan since it presents an opportunity for lower rates if the market trends that way, saving them money in the long run.

2. College loan interest rates are generally tax-deductible

One of the benefits of student loans is the ability to deduct interest payments from taxes. If borrowers meet certain qualifications, they can save a significant amount of money through student loan interest rate deductions depending on the amounts of their loans. Consult a tax advisor to get an accurate picture of student loan tax benefits.

3. Competitive interest rates for student loans have made them a preferred financing option

While there are other options available to finance a higher education, college loan interest rates have historically been as low as (or lower than) other types of loans used to pay for college. Also, interest rates on other loan products may consider factors outside of just your FICO score like loan-to-value, where student loans interest rates are typically based on credit scores.

However, interest rates for student loans aren’t the only consideration when determining how to pay for school. For example, if you’re a parent seeking a way to help your child finance an education, you might be considering withdrawing from a retirement account, but you should keep in mind you’ll likely need to pay taxes and steep early-withdrawal fees on the funds you take out. Plus, it could negatively impact your retirement plans if you’re unable to replenish the funds quickly. If you’re unsure how to pay and thinking about taking out a loan to help your child through school, the Citizens Bank Student Loan™ for Parents, may be your best option. It’s designed for college funding and you’re more likely to receive competitive rates than nontraditional options.

4. Some lenders offer student loan interest rate discounts

Interested in lowering interest rates for student loans? At Citizens Bank, borrowers have two ways to lower their interest rates. When you apply for a student loan at Citizens Bank, you’ll be eligible for a .25 percentage point interest rate Loyalty Discount if you have an existing account with us at the time of application. Additionally, borrowers who sign up for automatic payments are also eligible for a .25 percentage point interest rate discount.1 Those who take advantage of both discounts will save .50 percentage point on interest rates which could add up to substantial savings over the life of the loan. Always be sure to ask your lender about ways to lower interest rates prior to application.

5. Refinancing can lower a student loan interest rate

When students first apply for college loans, their lack of established credit histories may prevent them from getting the best student loan interest rates possible. However, after graduating and building credit, they might start looking for ways to reduce the interest rate they received as prospective students. Citizens Bank is one of the few lenders that provide options for students to lower student loan interest rates through refinancing or consolidation.

With a student loan refinance, the lender pays off the existing student loan and provides a new loan, with a lower rate, saving the borrower money in the long run. You can even consolidate multiple loans into one new one to simplify monthly payment obligations. If you’re interested in lowering your student loan interest rates or consolidating your student loans, apply for the Citizens Bank Education Refinance Loan®.

Learn more about college loan interest rates from Citizens Bank

There's a lot to consider and plenty of numbers to crunch when it comes to college loan interest rates, so be sure to have the information you need before making a decision. You can learn more about the student loan process to get a better picture of the lending choices available. You can also get direct answers to your questions by calling a Student Loan Specialist.

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