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Is it necessary for me to understand student loan interest rates when going for a student loan?

I am looking forward to college, and it seems doing away with student debt will be almost impossible to achieve. I think time is ripe now that I get to know more about student loan interest rates. I think I seriously need to get answers to questions like, how long does it take to pay off student loans. I overheard from someone that I could still refinance my student debt using earnest student loans saying it will be cheaper that way, how about taking this approach as compared to paying federal loans using the normal federal student loan interest rate?

Jan Berry

in Student Loans

1 answer

1 answer

Donald Ward on January 16, 2018

As education is becoming part and parcel of our every day’s life, student debt equally is becoming more and more common, it is important that those borrowing should seek to understand how much interest rates for student loans have impact on the total payment accrued during the life of a loan. For instance, if you took from the bank a 15-year, $50,000 loan at an interest of 5 percent, just a 2 percentage point increment on the interest could cost you  almost $10,000 interest charges on top of what you should have paid without the increment. Student loan rates are therefore a major factor in monthly payments as well as their total payment throughout the course of the loan. Having an understanding of the average student loan interest rates be it federal or private student loans will really be helpful in coming up with informed decisions in case the borrower seeks to refinance or wants to apply for a private student loan, it will also guide you on how long it will take to pay off the student loan.

The interest rate is always dependent on the type of loan that you decide to take and when the funds were disbursed to your account. Once you take out a federal student loan, the interest rate is fixed for life, this therefore means that for the borrower to get a lower rate, they can decide to refinance the debt with a private loaner. It is also worth remembering that these loans all have fees associated with each one of them. Again, Interest rates for Subsidized Loans and Unsubsidized Loans remain the same. Reason behind this is that interest on subsidized loans are paid for by the federal government as you get enrolled in college on at least a half-time basis. This is like saying you have been offered the equivalent of a 0% interest rate for your Subsidized Loan during the period in school which makes the loan less expensive as compared to the Direct Unsubsidized Loan.

You can refinance you student loan using an earnest student loan to enable you to have improved terms. Here, you’ll be given a new loan to pay off your existing loan and then you will only have one bill to pay every month. This will mean that you’ll get a new interest rate which will help you save money over the lifetime of your loan. The good thing here is that you can change the length of your repayment either making it shorter or longer with respect to what you can afford each month with Earnest’s Precision Pricing feature.

Brian Warner2 years ago

I like earnest student loans’ refinancing option, I think this is a great way of paying a loan debt at a cheaper rate. The advantage here is that you can refinance both federal and private student loans, this is inclusive of all types of federal loans and also private loans. It’s worth noting that when you refinance, you have the option of deciding which loans you want to refinance and which ones you are comfortable keeping with their current terms. And by the way, refinancing federal loans and private loans into one new private loan would mean that you will no longer be eligible using one of the government’s income-based repayment programs. It is therefore a good thing to take a look at your current loan’s terms before making a decision and whether really refinancing will help you do better. An estimated rate can be gotten from Ernest in just a matter of like two minutes.

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