Best Low-Interest Student Loans of 2024

When you take out student loans, you’re responsible for paying back the principal balance as well as the interest that accrues daily. The interest rate on your student loan will have a major impact on the total cost of the loan. The lower your interest rate, the more money you’ll save over the life of your loan.

To help you save money on loan costs, here are the best low-interest student loans and how to compare them. 

Start with federal student loans

The best low-interest student loans are most often fixed-rate federal student loans offered by the Department of Education. Unlike private loans, federal rates are the same for all student loan borrowers and are not based on your credit score and income. 

Below are the interest rates for federal Direct Loans disbursed between July 1, 2023, and July 1, 2024.

Federal student loans also come with unique borrower benefits and protections, such as forgiveness programs and income-driven repayment plans to help you manage your debt.

Generally speaking, you should maximize all of your federal loan options first, because of their competitive interest rates, repayment options, and forgiveness benefits. If you’ve used up your federal loan allowance and still need more funding, private student loans may be a good option. 

Compare private student loan rates 

Best low-interest student loans 

When comparing private student loans, look at factors like interest rates, fees, repayment options, terms, deferment and forbearance options, loan amount requirements, and any borrower perks. You may also see what rates you prequalify for without affecting your credit, before submitting a full application. 

Related: Can You Get a Student Loan With Bad Credit?

Methodology

We evaluated these student loan lenders based on interest rates and origination fees, loan amounts, loan terms, discounts, whether cosigners are accepted, and more. Our team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.

Federal vs. private student loan rates

Generally, borrowers take out federal student loans, private loans, or a combination of both. Each type of loan treats interest rates differently. 

Federal student loan rates are fixed, meaning once your loan is disbursed, your rate will never change. Also, most federal loans don’t require a credit check. Instead of basing your interest rate on your credit and financial situation, you’ll need to meet basic eligibility criteria like citizenship or permanent residency, age, and enrollment and institution requirements. 

The downside is that there are borrowing limits for most federal loans. In other words, you may not be able to cover all of your tuition and fees. 

Private student loans are provided through private financial institutions. Unlike federal loans, the rate you’re offered is tied to factors like your credit score, your income, and your debt-to-income ratio (DTI), among others. The stronger your credit, the more likely you can access a lender’s lowest rates.

If offered a private student loan, it might have a fixed rate, or a variable rate, which can change over time based on the rate market and economy.

How to get low-interest student loans

If you plan on taking out private student loans, here are some tips to help you get approved for the lowest possible interest rate: 

• Raise your credit score: Having a good credit score can help you save money on interest and qualify for the most competitive rates. Improve your credit by making payments on time, paying off all bills in full, and maintaining low balances on your credit card. Also avoid applying for too many loans or credit cards in a short period. 
• Add a cosigner: If you have a parent, partner, or family member who has excellent credit, ask them about being a cosigner. Adding a cosigner doesn’t just help your eligibility and approval odds, but can also help you get a lower interest rate.
• Sign up for autopay: Many private lenders offer an interest rate reduction for borrowers who sign up for automatic payments. Usually, the discount is 0.25 percentage points off your rate.
• Choose the shortest loan repayment term: A shorter loan term reduces risk for the lender, which translates to a lower interest rate. Just remember that choosing a shorter loan term means your monthly payments will be higher, but you’ll pay less interest over time. 
• Increase your income: Private lenders look for proof of income and employment when you apply for a loan. A higher income shows lenders that you’re reliable and can pay back the loan, which could help you qualify for a lower interest rate. 

Find Your Student Loan

Understanding student loan interest 

When you take out a student loan, the total amount borrowed is called the principal balance. Lenders charge interest on this amount as part of the cost of borrowing. How much you owe in interest is based on an interest rate, which is expressed as a percentage. This interest accrues daily, increasing the total amount you owe over time. 

As a borrower, you’re responsible for repaying both the principal balance and the interest, which together make up your total loan repayment amount. 

Private loan interest rates depend on whether you choose a fixed or variable rate. If you have a fixed rate, similar to federal loans, it won’t change during repayment. On the other hand, variable rates are at the mercy of economic factors outside of your control and can change at any time. 

Best low-interest student loans FAQ

Which type of student loan has the lowest interest rate?

Federal student loans typically offer borrowers the lowest interest rate, as well as many benefits. However, some private lenders may offer competitive rates to borrowers who have strong credit. 

How can I pay the least interest on student loans?

You can pay less interest on your student loans by choosing a short repayment term, paying more than the minimum, and signing up for auto-debit with an interest rate reduction. If you’re still in school, consider making interest-only payments to prevent interest from accruing.

How can I avoid interest on student loans?

You can’t avoid interest on student loans completely, but you can pay less by making extra payments and asking your loan servicer to apply them toward the principal balance. An autopay interest rate reduction can help as well. 

Are bank loans cheaper than student loans?

In most cases, it’s cheaper to take out federal student loans from the U.S. Department of Education. Federal loans are fixed-rate loans and offer many benefits. If you need additional funding, you may find competitive rates at banks and online lenders.