How to find low-interest student loans

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Federal loans should be the first option you turn to when looking for low-interest student loans. If you hit the borrowing maximum for federal loans, you can turn to private student loans. (iStock)

If you need to take out student loans to fund your education, you should exhaust your federal student loan options first. Thanks to historically low and fixed interest rates, they’re typically the most affordable way to borrow. But they do come with limitations.

Once you’ve tapped out your federal resources, you can apply for a private student loan. Private student loans are a great option for financing a college education, and depending on your credit — or your cosigner’s — you may be able to qualify for a private student loan with a low interest rate.

Keep reading to learn more about low-interest student loans.

9 of the best low-interest student loans

Before making anything official, it’s important to comparison shop when looking for a student loan, as each lender has its own rates, fees, and loan terms. If your federal financial aid package doesn’t cover the full cost of attending college, it’s especially important to carefully compare your private student loan options by researching the different terms and costs available to you.

Best low-interest federal student loans

Federal student loans typically have lower interest rates and are easy to qualify for.

Federal Direct Subsidized Loans: Best for undergraduate students with financial need

Federal Direct Subsidized Loans are available to undergraduate students with financial need. One of the main benefits of Federal Direct Subsidized Loans, is that the government pays all interest that accrues on subsidized loans while you’re enrolled in school.

Loan amount: Up to $5,500 depending on grade level and dependency status
Loan terms (years): Varies
Eligibility requirements: Must be a U.S. citizen or an eligible noncitizen; must be enrolled at least half-time in an eligible degree or certificate program
Discounts: None
Cosigner release: N/A

Federal Direct Unsubsidized Loans: Best for graduate students

Direct Unsubsidized Loans are available to both undergraduate and graduate students, regardless of their financial need, making them an ideal option for those looking to attend graduate school. Unlike with Federal Direct Subsidized Loans, you’ll be responsible for all interest that accrues on unsubsidized loans.

Loan amount: Up to $20,500 (less any subsidized amounts received for the same period) depending on grade level and dependency status
Loan terms (years): Varies
Eligibility requirements: Must be a U.S. citizen or an eligible noncitizen; must be enrolled at least half-time in an eligible degree or certificate program
Discounts: None
Cosigner release: N/A

Best low-interest private student loans

If you’re looking for a student loan with a low interest rate, here are some of the best private lenders to consider. These are all Credible partner lenders.

To see what rates you might qualify for, compare student loan rates using Credible.

Ascent: Best for discounts

Ascent is a great lender if you’re looking for discounts, and there are no application, origination, or disbursement fees to worry about.

Loan amount: $1,000 to $200,000
Loan terms (years): Five, seven, 10, 12, 15, and 20 (depending on loan type)
Eligibility requirements: Must be a U.S. citizen or permanent resident, have a minimum GPA of 2.9, and a minimum credit score of 600
Discounts: 0.25% to 2% automatic payment discount; 1% cash back graduation reward
Cosigner release: Yes, after 24 months of on-time payments

Citizens: Best for borrowers earning graduate or professional degrees

Citizens offers loans for graduate and undergraduate students, as well as parents taking out loans to help finance their child’s education. Citizens is an ideal option for students working toward graduate and professional degrees (such as law, business, and health care) because Citizens offers loans specifically tailored to them.

Loan amount: $1,000 to $350,000 (depending on degree and loan type)
Loan terms (years): Five, 10, and 15
Eligibility requirements: Must be a U.S. citizen or permanent resident; international students may apply with a cosigner who is a U.S. citizen or permanent resident; must be enrolled at least half-time in a degree-granting program; minimum credit score of 720
Discounts: 0.25% autopay discount; 0.25% loyalty discount
Cosigner release: Yes, after 36 months of on-time payments

College Ave: Best for flexible repayment options

This online lender has a simplified online application and approval process, and you won’t encounter any application, origination, or disbursement fees.

Loan amount: $1,000 up to 100% of the school-certified cost of attendance
Loan terms (years): Five, eight, 10, and 15
Eligibility requirements: Must be a U.S. citizen or permanent resident and be making satisfactory academic progress
Discounts: 0.25% autopay discount
Cosigner release: Yes, after 24 months of on-time payments

EDvestinU: Best for borrowers with good credit

EDvestinU offers flexible private student loans to graduate students and undergraduate students, and there are no fees.

Loan amount: $1,000 to $200,000
Loan terms (years): Seven, 10, and 15
Eligibility requirements: Must be a U.S. citizen or permanent resident and have a minimum income of $30,000 and a minimum credit score of 750
Discounts: 0.50% autopay discount
Cosigner release: Yes, after 36 months of on-time payments

INvestEd: Best for Indiana residents

If you're a student living in or attending school in Indiana, you can borrow from INvestEd. Borrowers can get a 2% principal reduction if they graduate within six years, and there are no application, origination, or disbursement fees.

Loan amount: $1,001 up to 100% of school-certified cost of attendance ($200,000 cap)
Loan terms (years): Five, 10, and 15
Eligibility requirements: Must be an Indiana resident or a U.S. citizen attending an eligible Indiana school with a minimum credit score of 670
Discounts: 0.25% autopay discount; reward for on-time graduation
Cosigner release: Yes, after 48 months of on-time payments

MEFA: Best for borrowers who prefer fixed-rate loans

Students attending a public or nonprofit school can take out a fixed-rate private loan with MEFA. There are no application, origination, or disbursement fees with MEFA private loans, so you should be able to anticipate exactly what you’re going to spend.

Loan amount: $1,500 up to school’s certified cost of attendance (depending on school type and minus other aid received)
Loan terms (years): 10 or 15
Eligibility requirements: Must be a U.S. citizen or permanent resident and be making satisfactory academic progress; minimum credit score of 670
Discounts: None
Cosigner release: Yes, after 48 months of on-time payments

Sallie Mae: Best for cosigner release

Sallie Mae loans are a good fit if you need a cosigner, as the cosigner can apply for cosigner release after just 12 months of consecutive on-time principal and interest payments. There are no application, origination, or disbursement fees.

Loan amount: $1,000 up to 100% of the school-certified cost of attendance
Loan terms (years): Five to 15
Eligibility requirements: Must be a U.S. citizen or permanent resident, or a non-U.S. citizen attending a school in the U.S. applying with a qualifying cosigner
Discounts: 0.25% autopay discount
Cosigner release: Yes, after 12 months of on-time payments

Compare student loan rates from these and other lenders using Credible.

How to qualify for a student loan

All lenders have different eligibility criteria, but here are some general requirements for qualifying for a student loan.

Private student loan requirements

Credit score — A good credit score helps your approval odds and helps you qualify for lower interest rates.
Credit history — Your credit history also helps determine eligibility and rates.
Income — Having a source of income makes it easier to qualify for private loans.
Debt — Lenders look at your debt-to-income (DTI) ratio when determining rates, and a lower DTI makes it easier to qualify for better rates.
Enrollment in a qualified educational program — Being officially enrolled in school is a must. Lenders will verify that you’re enrolled, and they may examine whether or not you’re borrowing more than you need for tuition and other education expenses.

Federal student loan requirements

Demonstrate financial need — Most federal student loan programs look at financial need when considering you for a loan.
Be a U.S. citizen or an eligible noncitizen — You must have a valid Social Security number (with the exception of students from the Republic of the Marshall Islands, Federated States of Micronesia, or the Republic of Palau).
Be registered with Selective Service — If you’re a male, you must register between the ages of 18 and 25.
Be enrolled or accepted for enrollment in eligible programs — Being enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program is a must.
Be enrolled at least half-time — Direct Loan Program funds require at least half-time enrollment.
Maintain satisfactory academic progress — This applies to both college and career school.
Sign the certification statement on the Free Application for Federal Student Aid (FAFSA®) — This statement confirms that you’re not in default on a federal student loan, don’t owe money on a federal student grant, and will use federal student aid only for educational purposes.
Show you’re qualified to obtain a college or career school education — You must have a high school diploma or a recognized equivalent, such as a General Educational Development (GED) certificate.

How does student loan interest work?

Whether you take out a federal or a private student loan (or a mixture of both), you’ll have an interest rate attached to each loan that’s calculated as a percentage of your current principal. Interest rates can be fixed and variable. While a fixed interest rate will remain the same for the life of a loan (and is always the type of rate you get with federal loans), a variable interest rate can go up or down due to an increase or decrease to the loan’s index.

Interest starts accruing when your loan is disbursed (with the exception of subsidized federal loans), and collecting interest payments is the primary way that the lender makes money. Private loans can be either fixed-rate or variable-rate loans, so you’ll want to take what type of rate you’re being offered into consideration when shopping for a loan.

If you take out federal student loans, you may have forbearance as a potential protection, which allows you to temporarily stop making student loan payments. This can be extremely helpful if you’re struggling to make your payments because of job loss or another form of financial hardship. But it’s worth noting that interest will continue to accrue during the forbearance period, and you’ll still be responsible for paying that interest.

You can calculate your total student loan interest and monthly payment by using this student loan calculator.

Federal student loans vs. private student loans

Federal student loans have fixed interest rates and are backed by the federal government. They usually have lower rates than private student loans, making them the more financially advantageous choice.

Eligibility for federal subsidized student loans is based on financial need. You don’t have to demonstrate financial need to qualify for federal unsubsidized student loans.

Federal student loans also come with income-based repayment plans and loan forgiveness options. With federal subsidized loans, the government actually pays the interest on the loan while you’re in school.

Private student loans are funded by private lenders — most commonly banks and credit unions — and they tend to have variable interest rates and come with fewer protections than federal loans. Eligibility for private student loans is usually based on your income and credit score. Private student loans are typically more expensive than federal ones, so again, it’s important to exhaust your federal options first.

But federal student loans have limited borrowing amounts, so it’s common for people to turn to private student loans to cover the gap. For example, with federal Direct Subsidized Loans, you can only borrow up to $12,500 (depending on your year in school and whether you’re a dependent), and the cap for Direct Unsubsidized Loans is $20,500. So it may be necessary to take out a private loan to cover your remaining education expenses.

When you’re ready to start shopping for a private student loan, Credible makes it easy to compare student loan rates.

Student loan FAQs

Here are the answers to some of the most common questions about student loans.

How do I apply for a student loan?

The process of applying for student loans varies. To apply for a federal student loan, you have to fill out the Free Application for Federal Student Aid (FAFSA), which helps your school's financial aid office determine how much aid you qualify for (student loans, scholarships, grants, and work-study programs). The process for applying for a private student loan, and what the requirements are, varies by lender.

Do I need a cosigner for private student loans?

You don’t always need to have a cosigner to take out a private student loan, but most private student loan lenders will require one if you don’t meet credit and income criteria. If you have bad credit or a low income, cosigners can help you get approved for a loan or receive a better interest rate. Your parents or another family member are likely your best option for finding a cosigner for your private student loans. But remember, your cosigner is on the hook to pay the loan if you default.

Can I get a student loan with bad credit?

Eligibility for federal student loans doesn’t depend on your credit. But most private student loan lenders will take your credit into account. Having a bad credit score doesn’t necessarily mean you won’t be able to take out a student loan, but you may only be approved for loans with high interest rates. This is where a cosigner with a strong credit score and history can make a real impact.

Should I refinance my student loans?

Refinancing can be a good solution when you want to consolidate your student loans or if interest rates have fallen since you took out your initial loan. But student loan refinancing can only be done through private lenders. When you refinance federal student loans into a private loan, you lose access to certain federal protections. To make sure losing those protections is worthwhile, you’ll want to shop around and compare rates.

Methodology

To identify the best low-interest student loans, Credible reviewed and researched multiple private student loan lenders, looking at factors such as interest rates, loan amounts, loan terms, repayment options, fees, and discounts. Credible also considered each lender’s eligibility requirements and cosigner release options.