College Interest Loan Rate: It Pays to Shop Around

A lower college interest loan rate can help you to save thousands of dollars, over the term of the loan. Research your options and make full use of your entitlement for grants and scholarships, before you consider a student loan.

Maximize your entitlement for federal student loans, before you opt for a private student loan, because private student loans usually have a high, variable interest rate, while federal student loans have a lower, fixed interest rate.

Borrow only as much as you can afford to repay and use the money for the purpose for which it has been borrowed.

Many non-traditional adult students are returning to college to get a degree that will help them to improve their career prospects. They need to find out about getting financial aid from their employers, and should also fill out the Free Application for Federal Student Aid (FAFSA).

They can also find out about the prospects of getting aid from their state, county or city, for retraining, especially if they have been laid off recently.

Interest rates for Federal Student Loans

Federal Stafford loans disbursed from July 1, 2006 onwards have a fixed interest rate of 6.8 percent. Those disbursed on or after July 1, 1998 and before June 30, 2006, have a variable interest rate, which cannot exceed 8.25 percent.

Federal PLUS Loans disbursed from July 1, 2006 onwards have a fixed interest rate of 8.5 percent. PLUS loans disbursed on or after July 1, 1998, but before June 30, 2006 have a variable interest rate, which cannot exceed 9 percent.

Consolidation loans have a fixed interest rate that is based on the primary rates of the borrower's underlying loans and usually range from 4.75 percent to 6.125 percent. The interest rate varies from borrower to borrower.

Interest rates for private student loans

Interest rates for private student loans vary from lender to lender. They depend on factors like the credit rating of the borrower, the institution, and whether the borrower has a co-signer.

Borrowers who have an excellent credit rating usually have to pay lower loan fees and a lower college interest loan rate.

Many private lenders determine the college interest loan rate, on the basis of the default rate in the college the student attends. Unfortunately, the poorest students often end up paying the highest college interest loan rate, because lenders factor in the default rates of other students at their college.

Colleges have been accused of accepting kickbacks from lenders and misguiding students, while lenders have been accused of indulging in deceptive practices. Due to this, many students have been stuck with big monthly payments, which they cannot afford.

It pays to shop around and compare the different options available to you, before you take out a student loan. It will take you years to pay off the loan and a lower college interest loan rate can help to reduce your debt burden.

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