How to Negotiate a Better Rate For Your Student Loans

Many students and their parents believe that student loan rates are not negotiable, but this is not usually the case. Just like mortgages, vehicle loans and other types of consumer loans, student loan rates vary greatly according to lender and they can be negotiated.

Understand Your Options

Most student loans are more flexible than other types of loans. Students can generally choose from a variety of payment schedules and methods as well as grace periods that are only available to students. Some lenders allow students to combine loans from other sources when they are taking out a new loan, while others do not. It is imperative that each student understands the options that are available to them before signing a loan contract.

Terms

Students who elect to put off making payments toward their student loan debt while they are taking classes. This practice often leads to very long loan terms and higher interest rates. Even paying the interest on the loan while you are attending classes can save you thousands of dollars over the life of the loan because the interest compounds less frequently than if you were not making any payments toward the debt during this time. This tip is unlikely to get you a lower interest rate on your loans, but it is almost guaranteed to save you money over the life of your student loan.

Increase Lender Confidence

Holding down a part-time job while you are in school allows you to pay some of your living expenses and decreases the amount of money you must borrow to survive. It may even help you get a lower interest rate because lenders have more confidence in students who are ambitious enough to work while they attend classes. This confidence often results in a lower interest rate.

Many students who are getting ready to attend college do not have assets or income to assure the lender that the loans they take out will be repaid. Using collateral such as a vehicle against a student loan debt is a good way to get a lower interest rate because the lender will feel more secure about lending you money, even if the value of the vehicle is considerably less than the amount of the loan.

Future Income

Lenders who believe that a student has a high chance of making a large income after they graduate are likely to offer lower interest rates. Students who are going through the loan process should think carefully about the degree they are pursuing and the employment options that are likely to be available after graduation. The lender will have questions about your goals when you meet with them, so it is essential that you have clear goals in mind and are prepared to answer their questions. Having information about salary and employment options in your field with you at your appointment will show the lender that you are prepared and organized. They will likely see you as a low-risk borrower and offer you a lower interest rate than they would have if you did not come prepared with this information.