Tips to Save on Student Loan Interest Amid Rising Rates

Interest rates on federal student loans are set to reach record highs for the 2024-25 school year, causing concern for students already burdened by debt. According to NerdWallet, undergraduate direct loans will have a 6.53% interest rate, up from 5.50%, while graduate and professional direct loans will have an 8.08% interest rate, up from 7.05%.

This increase in interest rates will make borrowing more expensive for students relying on federal loans to cover tuition costs. To help students save on student loan interest, here are some tips:

1. Tap out federal student loans first: Despite the rising interest rates, federal loans still offer more repayment options and borrower protections compared to private student loans. It’s generally more favorable to maximize federal student aid before turning to private loans.

2. Improve your credit score: If applying for private student loans, having a strong credit score can help secure a better rate. Lowering your credit utilization ratio and making on-time debt payments can improve your credit score over time.

3. Apply with a co-signer: If you have limited credit history, applying with a co-signer with good credit can increase your chances of approval and secure a competitive rate.

4. Look into any offered discounts: Signing up for autopay or taking advantage of loyalty discounts from lenders can help lower your interest rate on student loans.

As student loan interest rates continue to rise, it’s important for students to explore all options to save on borrowing costs and manage their debt effectively.