college

Lower Your Private Student Loan Rates

You probably won't find super-low rates, but it pays to check out what's available. Plus, when your job helps you earn student-loan forgiveness.

I've been out of school for six years and have several private loans that I'm still paying off. They have rather high interest rates of 7.5% to 9.5%, which are variable. Any suggestions on how to lower these rates?

You may not be able to get a better deal, but it's worth a try.

Private student loans don't qualify for the federal loan-consolidation program, which offers the most attractive interest rates. Although private loans may be consolidated, rates are generally higher and variable, based on a benchmark such as the prime rate, currently 8.25%, or the three-month LIBOR rate, currently 5.36%.

Depending on the lender and your credit rating, you might qualify for a rate as low as prime plus 0% or as high as prime plus 9% or more (ask if the margin can change over the term of the loan). Many lenders also charge a fee of 1% to 10%, which is added to the principal.

For top-rated borrowers, one lender was recently advertising a variable rate of LIBOR plus 1.8%, with no fees. The fixed rate was 2.01 percentage points higher. So it pays to check out what's available.

Even if you can't cut your rate significantly, consolidating private loans offers the convenience of writing a single check. And stretching out the term of the new loan lowers your monthly payments (although you'll pay more in interest over time).

Just make sure that there's no prepayment penalty if you want to pay ahead on your loan as your income rises. For an overview of loan-consolidation terms offered by a number of private lenders, start at www.finaid.org.

When your loans can be forgiven

I am working in the special-education department in a low-income school district. Does this make me eligible to have my federal Stafford loans forgiven?

Your job may qualify you to have up to $17,500 of your Stafford loans forgiven.

But before any portion of the loans can be written off, you must meet certain certification criteria and teach for five consecutive years in a low-income school (call 800-433-3243 or see "cancellation/deferment options for teachers" at www.studentaid.ed.gov).

Other public-service jobs also qualify for student-loan forgiveness (see Shrink Your Loans), and some occupations use it as a recruiting tool (see www.finaid.org).

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked
stocks

The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked

The Berkshire Hathaway portfolio is a diverse set of blue chips, and increasingly, lesser-known growth bets. Here's a look at every stock picked by Wa…
November 16, 2021
The Case Against Owning All Dividend-Paying Stocks in Retirement
investing

The Case Against Owning All Dividend-Paying Stocks in Retirement

Income investors are often all about dividends, but that may not be a smart strategy for retirees. Here’s why, and what investment model they should c…
November 8, 2021

Recommended

The Return of Student Loan Payments
Paying for College

The Return of Student Loan Payments

A pandemic reprieve on student loan payments ends in January. If you still need financial help, there are steps you can take.
November 22, 2021
How to Balance Saving for Retirement and Your Kids’ Education
college

How to Balance Saving for Retirement and Your Kids’ Education

Achieving your goals takes patience and time – but starting early will give you a big edge. And while it may feel unnatural, put yourself (and your re…
October 29, 2021
Thoughts Before Funding a 529 College Savings Plan
college

Thoughts Before Funding a 529 College Savings Plan

Watching your college savings grow tax-free with a 529 college savings plan feels great, but failing to follow the rules could come with penalties and…
October 23, 2021
Saving for College? Everything You Need to Know About 529 Plans
529 Plans

Saving for College? Everything You Need to Know About 529 Plans

529 plans offer considerable convenience and potential tax savings when putting money aside for education. That said, there are still a range of rules…
October 22, 2021