How to Find Student Loan Discounts

Student loan discounts are a fantastic way of saving money on your college education. Student loan discounts are actually fairly easy to find because all student loan companies want your business. It is easy to get tempted by low interest rates, however, and not look at all of the other factors that go into a good student loan. Here's also our handy checklist on what to look and watch out for when getting a loan discount.

All About Student Loan Discounts

So, the lowdown with student loan discounts is that ever since 1965 when the Higher Education Act was passed, the maximum interest rates were set on all student loans. No student loan can exceed this set interest rate. However, there’s nothing on the law books that says you can’t make the interest rates lower than the national maximum. This creates competition between student loan companies and drives them to lower their rates to attempt to get your business.

Most of the time, student loan discounts are distributed over time. So, you may begin paying back your loan at a certain rate but receive discounts for making consistently on-time payments, making payments automatically from your checking account and other factors.

Another reason student loan companies provide such fantastic discounts is because they are in direct competition with each other. When it comes time to begin repaying, consolidating student loans may be another viable option for you. This is where the competition really comes into play. Since you no longer have to refinance with the lender that originally loaned you the money, you can consolidate your loans with any student loan company.

Now that lenders fear losing their borrowers to other companies that offer better rates, loan companies are doing everything in their power to make your rates as low as possible.

Types of Student Loan Discounts

While lenders can discount your loan in any number of ways, there are several methods that are the most common and that deserve a mention here.

The Direct Debit Discount

This is probably one of the most common types of loan discounts. If you set it up so that your monthly loan payments are taken directly out of your checking out, you will get a discount on your interest rate. This discount is typically around 0.25%, which is significant over time!

The Waived Origination Fee Discount

A lot of the time when you begin borrowing from a new lender, they will charge you an origination fee to get started. However, many student loan companies waive this fee to encourage you to select them as your lender. This waiver of the origination fee typically applies to the Federal Stafford Loan.

The On-Time Payment Discount

When you make payments on-time each and every month, your loan company will often reward you for your diligence. For instance, when it comes to the Stafford Loan, you can receive up to a 2% interest rate discount after making payments on-time for four consecutive years. Likewise, the PLUS Loan offers something very similar. If you make payments on-time for 3 consecutive years, you will receive a 1% interest rate discount. These may seem like small amounts, but they really do save you a lot of money in the end.

The key to real discounts on your student loans is to always be consistent. Sure, it may sound easy to make on-time payments for several years in a row on paper, but it’s not always so easy in practice. It may take some self-discipline, but by ensuring your payments are made on-time every time, you do yourself a great service.

Read the Fine Print

While many lenders are competing for your loan, you need to be careful and always read the fine print of every clause on the contract. For instance, if you decide to consolidate your loan with another company, you may have to pay back any rebates or principal reductions you may have received.

Also, you may not qualify for certain loan discounts if your loan balance is below a certain amount. Typically the most impressive discounts are for those individuals with very large amounts of debt—lenders want to keep these people’s business, especially.

So, student loan discounts can be a wonderful thing and a great means of making your college education more affordable. Just be sure to always know what you’re getting into before you sign your name on the dotted line.