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Step-by-Step Guide: How to Get a Low-Interest Student Loan

Matthew Levy Updated: November 12, 2023 • 5 min read
happy college student on campus

Key Points:

  • The student loan debt load in the U.S. now totals more than $1.73 trillion.

  • One thing you’ll want to do is secure a lower student loan interest rate if possible.

  • With the right approach, low-interest student loans can become powerful tools.

The cost of college has risen significantly in the past 40 years; in fact, it has almost doubled. The student loan debt load in the U.S. now totals more than $1.73 trillion, according to the Federal Reserve. This means that those looking to further their education likely need help financially, and securing a student loan can be one of the first steps you take to achieve your educational aspirations. 

Low-interest student loans can become powerful tools.

One thing you’ll want to do is secure a lower student loan interest rate if possible, as it can significantly ease the longer-term financial burden after you graduate. With the right approach, low-interest student loans can become powerful tools, enabling learners to focus on their studies now and establish a strong financial footing in the future. 

Guide to Securing a Low-Interest Student Loan

Securing a low-interest loan is straightforward with these steps:

  1. Assess Your Federal Loan Options: Start by filling out the Free Application for Federal Student Aid (FAFSA) to access federal loans, which often feature the lowest interest rate. 
  2. Research Subsidized Loans: If you can demonstrate financial need, federal subsidized loans will cover your interest charges while in school. 
  3. Maintain a Strong Credit Rating: A good credit score can help with private loan eligibility. Pay your bills on time and manage your debt responsibly to build your score. 
  4. Consider a Co-signer: If your credit score is limited, a co-signer with strong credit can help you qualify for lower rates on private loans. 
  5. Compare Loan Offers: Don’t settle for the first offer you get - compare rates from multiple lenders to ensure you’re getting the best deal. 
  6. Explore Local and Specialized Options: Sometimes, local credit unions or even profession-based organizations offer student loans at competitive rates. 

Below, we will look deeper at student loans to get you in the best position possible when applying for financial help. 

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Understanding Student Loan Interest Rates

Interest rates on student loans are instrumental in the total amount you’ll repay over the life of your loan. Essentially, the interest rate is a percentage of the loan periodically tacked onto the total balance you owe, i.e., the cost you pay for borrowing the money. Student loan rates can vary widely and can be fixed or variable rates. Federal student aid generally offers fixed interest rates that are constant over the life of your loan, making budgeting for repayments more predictable than variable rates. 

In contrast, private student loans can offer both fixed and variable rates, with the latter based on market interest rates. While private loans may initially provide lower rates, they’re often based on your creditworthiness, so you’ll probably need a co-signer to get the best deals. Federal loans are generally more accessible with rates set by the government and don't require a co-signer. If you’re evaluating your loan options, understand the differences as they will influence your financial planning both during your school time and after graduation, which will impact your repayments for years to come. 

Strategies to Secure Low-Interest Loans

There are a few strategies for getting a lower interest rate on student loans. Securing a loan with a low-interest rate helps ease the burden of higher education. 

  • First, exhaust all federal options available through the Free Application for Federal Student Aid (FAFSA).
  • Subsidized federal loans are desirable as the government covers the interest while you’re in school. 
  • Given that you’re looking for lower interest rates on student loans, the federal loan rates are typically lower than private rates and are also not dependent on credit history. 

For those looking at private student loans, a strong credit score and a qualified co-signer are the best way to secure those lower interest rates. A co-signer, often a parent or a relative with an established credit history, can help secure a lower interest rate. Maintaining a good credit score, or leveraging that of a co-signer, is needed to minimize loan costs and achieve a more favorable financial plan and repayment of loans after graduation. 

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Navigating Federal Student Aid

Securing Federal student aid begins with the FAFSA noted above. It’s a straightforward process, as students and their families simply provide financial information, which the government and educational institutions use to determine eligibility for financial aid, including loans with lower interest rates. These federal loans come with fixed rates, which can be lower than private loans as the government subsidizes them. The rates are set annually and aren’t influenced by individual credit scores, making them more accessible. 

Considering Private Student Loans

Federal loans are often the go-to for lower interest rates and more flexible repayment plans, but there are situations where private student loans can fill funding gaps. The most important thing you can do when considering private student loans is to shop around to secure the cheapest student loans possible. Private loans can vary significantly regarding interest rates, fees, and repayment options. To find the best deal, compare rates from multiple lenders, read the fine print, and understand the terms and conditions - i.e., do your due diligence. Additionally, applying with a creditworthy co-signer can get you more favorable rates and terms. If you need to, consider private student loans only after maximizing federal aid, scholarships, and grants to ensure you choose a financially sound option. 

The Role of Refinancing and Consolidation

Refinancing and consolidation can be strategic for managing student loan debt effectively. Student loan refinancing typically involves paying off existing loans with a new one with a lower interest rate or more favorable terms. It’s an option that can lead to significant savings over time, especially if you have improved your credit score or even get a co-signer with strong credit to help you get a lower rate. 

On the other hand, loan consolidation allows you to merge multiple loans into one for streamlined payments. Although it may not always result in a lower interest rate, it can make managing payments easier. When considering either option, understand how you could reduce your student loan interest in the long term, which includes any loss of federal loan benefits if you refinance with a private lender. Beware of the fine print!

How to Reduce Interest on Your Existing Student Loans

If you’re wondering how to reduce interest on student loans, you’re not alone. Lowering the burden of interest on your loans can save you a significant amount of money over the life of your student loans. One strategy that can help is making more than the minimum monthly payment, directly lowering the principal balance and, consequently, the interest accrued. 

This will reduce student loan interest overall. You might also explore income-driven federal loan repayment plans, potentially leading to interest subsidies or loan forgiveness after a certain period. Consider refinancing if it makes sense for private loans, especially if your credit score has improved since you first took out the loans, as you may qualify for lower rates. 


Securing a student loan with a low-interest rate is important to manage your financial future. Exhaust your federal aid options, consider a strategic approach to private loans, and understand any refinancing options to take control of your educational debt. Remember to weigh all of your options, stay informed about the terms and conditions of each loan, and seek alternative options often to see if you can reduce the cost of your borrowed funds.



What's the best way to secure a low interest student loan?

Prioritize applying for federal student loans through the Free Application for Federal Student Aid (FAFSA), as they typically come with lower interest rates and more favorable repayment terms. Additionally, maintaining a strong credit history or having a co-signer with one can increase your chances of securing a low interest rate with private lenders.

Can I negotiate a lower interest rate on my student loans?

For federal student loans, interest rates are set by law and cannot be negotiated, but you might have some flexibility with private student loans. If you have a higher credit score or a strong financial backer, private lenders may offer refinancing options at a lower interest rate.

Does paying more than the minimum reduce loan interest?

Absolutely, making extra payments on your student loans can reduce the principal balance faster, reducing the amount of interest that accrues over the life of the loan. Be sure to inform your loan servicer that any extra payments should be applied to the principal, not future payments.

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Written by Matthew Levy

Matthew is a freelance financial copywriter with 14+ years in financial services. He holds a Bachelor of Science degree in Economics with business and finance options and is a CFA Charterholder. He is from Vancouver, Canada, but writes from all over the world.