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Average Student Loan Interest Is 5.8%: How to Lower Your Rate

Ben Luthi

Federal student loan
Payments Return August 31

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Federal student loan
Payments Return August 31

We've got you covered.

Get Purefy’s free 20-page Ultimate Guide with just one click.

Student loan debt isn’t nearly as costly as credit cards or even personal loans. But because college graduates leave school with almost $30,000 in debt on average, regardless of whether they’ve landed a job, it can be crippling to their financial plans.


On average, student loan borrowers have a 5.8% interest rate on their debt. But thanks to record-low interest rates offered by private lenders like banks and credit unions, you can find out how to lower student loan interest on your debt to save money.

Here’s what you need to know about getting a lower student loan interest rate.

The state of student loan interest rates

Student loan interest rates can vary depending on your type of loans, the lender, and possibly other factors. If you have federal student loans, interest rates are updated once each year by Congress. With private lenders, however, interest rates can vary based on the lender, current market rates, your credit history, and your financial information.

Regardless of what you’re paying now on your student loans, though, there are ways to lower student loan interest rates.

Refinancing your student loans is one of the most effective ways to do this, and because of the current economic conditions, refinancing rates are at an all-time low.

Did you know? Comparing your prequalified refinance rate options only takes 2 minutes.

If you’re interested in saving money, use our rate comparison engine to quickly see real-time rate offers from industry-leading lenders.

Takes 2 minutes • No impact on credit

In March of 2020, the Federal Reserve cut its federal funds rate to nearly zero. While this rate doesn’t directly impact student loan refinancing rates, it makes it cheaper for banks to borrow money from each other to meet cash reserves. In turn, banks reduce their interest rates for consumers, which allows student loan borrowers an option for how to lower student loan rates.

How to lower student loan interest rates

If you’re struggling to keep up with your student loan payments or you simply want to save money as you pay off your debt, here are some of the ways to lower student loan interest rates.


Student loan refinancing

Refinancing your student loans involves replacing your current loans — federal, private, or both — with a new loan from a private lender. If you have interest rates at or near the average of 5.8%, you could potentially score a much lower rate and save hundreds or even thousands of dollars on your loans.

Student loan refinance rates are currently at all-time lows — but that won't last for long.

Similar to mortgage refinance rates, student loan refinance rates are now at dramatic lows. Don’t wait to see if you qualify for a major drop in interest.

Takes 2 minutes • No impact on credit

Student loan refinancing can also allow you to get more flexibility with your loan repayment by shortening or lengthening your term.

Just keep in mind that if you refinance federal student loans, you will lose access to the benefits the U.S. Department of Education provides, which includes access to forgiveness programs, income-driven repayment plans, and forbearance and deferment options that are generally more generous than what private lenders provide.

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Set up automatic student loan payments

Many student loan lenders and servicers offer a small interest rate discount (typically 0.25%) if you set up your payments to run automatically every month. This incentive saves you money and also makes it more likely that you’ll pay your bill on time, which is good for the lender.

Setting up autopay can also be good for your credit score because it ensures you’ll never miss a payment, as long as you have the cash in your bank account to cover the expense.

Check with your current lender or servicer to see if there’s an autopay discount. Also, if you’re considering refinancing, include this feature in your research to maximize your savings.

Score a relationship discount with your lender

Some private lenders will also give you a discount on your interest rate if you have an existing relationship with them. In most cases, this means you have a checking account, investment account, or other type of loan with the same bank or credit union.

The discount typically runs 0.25%, which isn’t a lot, but it can provide some savings and give one lender an edge over another as you’re comparing refinancing options.

How to lower student loan interest rates with a cosigner

Refinancing your student loans can save you money on interest charges, but only if you qualify for a lower interest rate. Based on data gathered by Purefy, people who refinance their student loans have an average annual income of $98,156 and an average FICO credit score of 774.

This doesn’t mean you can’t qualify if you don’t meet those lofty criteria, but it can make it more challenging to get a low interest rate.


If this is the case, consider asking someone to cosign your loan application, especially if you have a trusted family member who has a solid income and high credit score.

Cosigning will result in the loan being added to their credit report, and it can impact their credit if you miss a payment. But many private lenders offer cosigner release, which allows you to have your cosigner removed. To qualify, you typically need to make a certain number of consecutive on-time payments and meet certain credit and income requirements.

How to lower student loan rates by comparison shopping

If you’re refinancing your student loans, one of the best ways to maximize your savings is to shop around and compare rate offers from multiple lenders. Most lenders will allow you to get prequalified online before you apply, so you can get an idea of what terms you might expect.

Your prequalification offer isn’t final, which means that your actual interest rate can be higher or lower than what you get before you apply. But it can provide you with the information you need to make an informed decision.

Purefy’s Compare Rates tool helps you speed up and simplify the student loan refinance comparison process. Simply provide a little information about yourself and your student loans, and Purefy will give you rate quotes from multiple lenders all at once and all in one place.

This process not only goes faster but also makes it easier to compare your options side by side. As you shop around, make sure you’re reviewing more than just the interest rate. Also, make sure you know whether the rate is variable or fixed. Variable interest rates typically start lower but can increase over time, potentially making the loan more expensive.


Whatever you do, make sure you explore all your options for lowering your student loan interest rates so you can save the most money possible.

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