Comparing private student loan rates can save borrowers $5K+, data shows

College students are headed back to campus this fall, which means it's time to start budgeting for higher education expenses for the year ahead. This is no easy feat, seeing as college tuition has risen 33% since 2000, and that's only a fraction of the total cost of attendance.

The cost of an undergraduate degree can top $100,000 or more, and that's not even accounting for graduate school. But federal loan limits remain low at $31,000 for all four years of undergraduate study, which means that many students need to explore alternative options to bridge the financing gap. 

About 1 in 8 families will turn to private student loans to help pay for their education, according to Sallie Mae. Private student loans can be a good option for students and their families who need to borrow extra money to cover college expenses, since interest rates are competitive with — and often lower than — federal student loan rates. And since private student loan rates can vary from lender to lender, it's important to shop around for the lowest rate possible for your situation.

Comparing private student loan interest rates can save borrowers $5,000 or more, according to a recent Credible analysis. Learn how shopping around can save you thousands on your student loans over time, and visit Credible to view private student loan offers from online lenders without impacting your credit score.

See how comparing student loan interest rates can save you thousands

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While federal student loans come with set interest rates, private student loan rates vary based on a number of factors. Private lenders set interest rates based on the borrower's creditworthiness, as well as the total loan amount and repayment term.

Borrowers who took out private student loans on Credible's marketplace in June 2019 saw a significant spread between the highest and lowest interest rates they were offered. Here's how much borrowers paying back median loan balances of $20,000 can potentially save in interest, based on the average interest rate spread across different loan types:

• 10-year fixed-rate: 1.68% spread, $3,922 interest savings
• 10-year variable-rate: 1.52% spread, $3,472 interest savings
• 15-year fixed-rate: 1.15% spread, $3,996 interest savings
• 15-year variable-rate: 1.51% spread, $5,189 interest savings

You can use a student loan calculator to determine how much you can save on interest by securing a lower annual percentage rate (APR) on your private student loans. To see your estimated private student loan rates, get prequalified through multiple lenders on Credible.

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How to qualify for a low rate on your private student loans

Since your interest rate will impact the total amount you pay for your private loans, it's important to try to find the lowest interest rate possible for your situation. Doing so means you'll pay less toward interest over the life of the loan, and you'll save money in the long run. Here are some measures you can take to try to get a low rate on private student loans:

• Work on building your credit before applying. Private student loan eligibility varies depending on the borrower's credit score, among other factors. Well-qualified borrowers with FICO scores of 750 or higher will qualify for the lowest student loan rates.
• Enlist the help of a creditworthy cosigner. Since many rising college students haven't had the opportunity to build their credit history, it's common to ask a parent or guardian with excellent credit to cosign on the loan. By doing this, the cosigner will be equally responsible for making sure the loan is repaid.
• Sign up for automatic payments. Select student loan lenders offer an automatic payment discount if you enroll in auto debit from an authorized bank account.
• Compare rates for different repayment options. You may be able to secure a lower interest rate by switching to a shorter loan term or a variable interest rate. A larger principal balance may also come with higher interest rates.

It's free to shop around for student loan offers on Credible's online loan marketplace. Just fill out a single form to see your repayment plans across multiple private student loan lenders, all without a hard credit inquiry. 

If you still have questions about the student loan borrowing process, get in touch with an experienced loan officer at Credible.

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Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.