For many borrowers, the best low-interest student loans are federal subsidized and unsubsidized student loans. These loans carry low fixed interest rates that aren’t based on your credit and offer a range of consumer protections. But because there’s a limit to how much you can borrow in federal loans, some students may seek out private student loans to make up for a gap in funding.
Below we’ve listed our top-rated student loan options with the lowest advertised interest rates. Keep in mind that only the most creditworthy borrowers will receive the lowest rates available, and that variable rates can increase in the future.
Best Low-interest Student Loan Options
Ascent offers both co-signed and non-co-signed student loans, which gives borrowers without co-signers more college funding options. We scored the company based on its co-signed credit-based student loan for undergraduates.
Ascent stands out for its range of payment reduction and postponement options, rare among private lenders. Borrowers can choose a graduated repayment plan, which provides a lower monthly payment to start that increases over time. That can be useful for graduates just starting out, who will likely make more money as they move up in their careers.
Borrowers also can pause payments if they’re experiencing a temporary financial hardship for one to three months at a time, up to a maximum of 24 months total. (Taking this forbearance means you will repay the loan over a longer period, though.) Interest continues to accrue during forbearance, which is true for the vast majority of private student loans.
Ascent also offers a graduation reward of 1% of the loan’s original principal balance. Check the conditions you must satisfy to qualify.
Ascent was a winner of Forbes Advisor’s best private student loans of 2020 awards. Learn more here.
Loan terms: 5, 7, 10, 12 or 15 years
Loan amounts available: $2,001 up to total cost of attendance, to a maximum of $200,000 per academic year ($200,000 aggregate)
Eligibility: Student borrowers with no credit history can qualify with a creditworthy co-signer. Co-signers must show income of at least $24,000 for the current and previous year. Co-signers must have a minimum credit score of 660 if the student has a score of less than 700, and a minimum credit score of 620 if the student has a score of 700 or higher.*
Forbearance options: When experiencing financial hardship, borrowers can suspend payments for up to three months at a time, for a total of up to 24 months throughout the loan term. Only four rounds of forbearance (up to 12 months’ worth) may be taken consecutively.
Co-signer release policy: Available after 12 months of consecutive automatic debit payments, if the primary borrower meets certain credit score requirements.
*Ascent Student Loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/
2.Federal Direct Subsidized Loans
Among undergraduate and graduate student loan options, federal direct subsidized loans are the cheapest and most flexible. Only undergraduate borrowers with financial need—as determined by the information in the Free Application for Federal Student Aid, or FAFSA—can get subsidized loans. The government will pay the interest when students are in school, during their grace period and when they put their loans into deferment.
The interest rate on subsidized loans is one of the lowest you’ll find, and no co-signer is required. All eligible undergraduate borrowers qualify and they receive the same rate regardless of credit history. Most importantly, borrowers of federal subsidized loans have access to income-driven repayment options that can lower the amount due and loan forgiveness for those who work in public service fields.
While there is an origination fee of 1.057%, it’s lower than what many private lenders offering loans without a co-signer charge.
Loan terms: 10 to 25 years, depending on the repayment plan
Loan amounts available: $3,500 to $5,500 per year, depending on year in school; $23,000 in aggregate as an undergraduate
Eligibility: Must be enrolled at least half-time in a school that participates in the federal direct loan program. Must be an undergraduate and be determined to have financial need.
Forbearance options: Forbearance available for up to three years in certain circumstances. Enrolling in an income-driven repayment program can lower monthly payments and result in loan forgiveness after 20 to 25 years
3.Federal Direct Unsubsidized Loans
Federal direct unsubsidized loans are available to all undergraduate and graduate borrowers regardless of financial need, and there’s no co-signer required. They don’t come with a break on interest like subsidized loans do, so as an undergraduate, be sure to max out subsidized loans before turning to unsubsidized ones.
While there’s a chance the most creditworthy unsubsidized loan borrowers could get a lower interest rate with a private student loan, they’ll miss out on a range of consumer protections that might be useful in the future. Borrowers of federal direct unsubsidized loans have access to income-driven repayment options that can lower the amount due and loan forgiveness for those who work in public service fields.
Direct unsubsidized loans come with an origination fee of 1.057%, while most private graduate loans do not. But in many cases, the low interest rate and loan benefits make the fee worth it.
Loan terms: 10 to 25 years, depending on the repayment plan
Loan amounts available: $8,000 in aggregate for dependent undergraduate students; $34,500 in aggregate for independent undergraduate students; $73,000 in aggregate for graduate or professional students (including loans used for undergraduate study)
Eligibility: Must be enrolled at least half-time in a school that participates in the William D. Ford Federal Direct Loan Program
Forbearance options: Forbearance available for up to three years in certain circumstances. Enrolling in an income-driven repayment program can lower monthly payments and result in loan forgiveness after 20 to 25 years.