How to save more money on your student loans

Saving on student loans is possible if you follow these four steps. Read on to learn how to reduce your monthly payment and lower total borrowing costs. (iStock)

Repaying your student loans can be a major financial burden, especially during the coronavirus pandemic and the resulting recession.

The good news is, saving on student loans is possible if you can reduce the interest rate you're paying. Interest is the cost of borrowing and the lower your rate, the less expensive your loans are, and the easier it is to pay them off.

You can find lower rates with a student loan refinance. Credible can reveal what refinance rates you qualify for. You can compare student loan refinancing rates from up to 10 lenders without affecting your credit. Plus, it's 100% free!

How to save money on student loans

There are a number of ways to reduce your student loan interest rate, including taking the following four steps.

  1. Refinance student loans
  2. Selecting a variable interest rate
  3. Improve your credit score
  4. Apply with a co-signer

1. Refinance student loans

Once you have already borrowed for school, the best option for saving on student loans is to refinance your loan. Refinancing your student loan is generally free, and it can enable you to both reduce your monthly payment to increase your cash flow and to save thousands on interest over time.

Refinancing involves applying for a new loan with a different lender to pay off existing loans. Usually, you'll only want to repay private student loans, as paying off federal loans with a private refinance loan would mean giving up important borrower benefits.

To see if refinancing is right for you, view this rates table that compares rates from multiple lenders at once.


If your new loan has a lower interest rate than your old ones, you'll reduce borrowing costs. Depending on how long your new loan repayment term is, you should be able to drop your monthly payment, reduce the total interest paid over time, or both.

If you can get a loan at a lower rate than you're currently paying, use an online student loan refinancing calculator to better understand what your new monthly payments and total borrowing costs could be.

2. Selecting a variable interest rate

When you refinance your student loans, you'll have a choice of a fixed- or variable-rate option. A fixed-rate loan would lock in your rate for the entire repayment time while a variable rate is tied to a financial index and can change over time.

The average interest rate on variable rate loans is generally far lower than the average rate on fixed-rate alternatives.

Comparison shopping to get quotes from several lenders can also help ensure you're getting the most affordable loan possible as rates do vary. You can use Credible to compare student loan refinancing rates from multiple lenders at once without affecting your credit score.


According to Credible's data on student loan refinance interest rates, for example, a 10-year fixed-rate loan had an average interest rate of 3.95% in November 2020 for borrowers with credit scores of 720 or higher. By contrast, the average rate on a 5-year variable rate loan was just 3.25%.

If your goal is to get the lowest rate possible, a variable rate loan will likely provide it. While you do take on the risk of rates rising over time, they could also go lower. And if they do go up, you'd generally have the option to refinance again if you chose to do so.

3. Improving your credit score

If you're planning to refinance your student loans, you can maximize the chances of getting the most competitive rate possible by taking steps to improve your credit score before applying. That's because credit score is one of the most important financial credentials lenders use to decide if they should give you a loan and what interest rate they should charge you to borrow.

Improving your credit score can involve several different tactics. If there are errors on your credit report that have caused your score to be lower, you'll want to get them corrected ASAP. You should also work on repaying some of your debt, as this can help you raise your score by showing a positive payment history and reducing the ratio of your debt relative to your available credit. The higher that ratio, or the more of your available credit you've used, the lower your score will be.

If you're confident in your credit score, then you can plug in some of your information into Credible's free online tool to find out what kind of student loan refinance rates you qualify for today.


4. Applying with a co-signer

Often, you may not have the income or credit history necessary to get the best possible refinance rate. The good news is, student loan refinance lenders are generally willing to allow you to apply with a cosigner.

A cosigner shares legal responsibility for repayment if you don't pay back your student debt. Lenders consider their credentials and, if they're well-qualified borrowers, you'll get approved for a loan at a lower rate. Many lenders also allow cosigner release after you make a certain number of on-time payments, which means your lender may only need to guarantee the loan for a short time.

By taking these steps, you may be able to reduce your student loan costs substantially, which can be especially important during these times of economic uncertainty. To find out if refinancing could save you money, use an online tool like Credible to compare student loan refinancing rates and see which lenders allow you to add a cosigner.