Why should I shop for interest rates when it comes to my student loans?
Even a 1% difference in interest rate could make a significant difference in the amount of money you’ll pay in interest on any loan (not just student loans.) Here’s an example:
The average student takes out nearly $30,000 in student loans over four years. With an interest rate of 9% annually, the student can expect to pay nearly $15,700 in interest alone over ten years, if it took them the full ten years to pay off the loan.
If you go shopping, you could get offered an interest rate of 7%. The same borrower who took out $30,000 at 7% interest annually would pay $11,800 over ten years. The difference over four years is almost 4k, which spread over the years isn’t a ton of money, but is enough to set aside in retirement, put a down payment on a car, or get into your first apartment.