Student loans: Step 2

Updated: Nov 6, 2020

Now that you've been able to get organized and you're starting to understand your entire student loan picture, it's time to start considering the mathematics them.

Interest Rates

When it comes to student loans (or any type of loan for that matter), the interest rate is arguably the most important aspect of that loan. Interest is paid to a lender as a cost of borrowing money. Interest is calculated as a percentage of the unpaid principal amount. Unlike other forms of debt, such as credit cards and mortgages, Direct Loans are daily interest loans, which means that interest accrues (accumulates) daily. Depending on whether your loans are subsidized or unsubsidized, you may or may not be responsible for paying the interest that accrues during all periods.

The higher your interest rate is the more you'll end up paying for your loan. For example, the difference between a $30,000 student loan with an 8% interest rate, and a 5% interest rate is almost $5.5k dollars! (See the example below)

Lowering your interest rate even the slightest could have significant impacts on how much you ultimately end up paying on your student loans.

Interest Rates Change

Both fixed and variable private loan refinancing rates can change based on economic factors. When rates are pushed down, you may want to take advantage of the situation by refinancing. However, there are many other variables that affect private student loan interest rates, too. From market factors to rate choice and your creditworthiness, many ingredients make up the interest rates you see advertised across private lenders. That's why consistently monitoring interest rates is critical when you're trying to find the best deal.

One of the most effective ways to reduce interest charges is to refinance your student loans. The sooner you refinance the more you could save on the interest of your loans. If you can get a lower interest rate immediately you could save thousands of dollars in interest payments and pay off the loan quicker.

Step 2:

Question: What are you saying I should do?

Answer: Monitor Rates

Unfortunately, the interest rate on your student loans can cause your loan balance to grow significantly over time. However, by understanding how interest rates work and the different ways to lower your rate, you can minimize the amount of interest that accrues and pay off your debt faster. Did you know that with most loan providers it is completely free to refinance your student loans?

Of course, there are credit score implications that come with refinancing, but by and large, you can refinance your student loans nearly as many times as you'd like. This is why consistently monitoring what the market rate is for student loan interest rates is extremely important! However, over 60% of people say that haven't considered refinancing because it seems confusing.

Enter apay!

(Second shameless plug) We've partnered with CommonBond to offer refinancing to our users. Of course, we think student loan refinancing can help a lot of people, but if it’s not a good idea for your situation — we’ll tell you that. The great thing about apay partnering with Commonbond is that you no longer have to deal with the uncertainty of wondering what you should do. Commonbond makes it really easy to check rates in under 5 minutes. Simply fill out some basic information, review the options that you qualify for, and submit your loan information.


The bottom line is—if you have multiple student loans, a good-paying job, and decent credit, refinancing your loans is probably the right answer. However, if you rely on one of the federal programs, such as income-based repayment, it’s best to stick with that. Nevertheless, it's important that you can quickly and easily check interest rates and compare what you're paying verses what the market rate is offering.

So...step 2... check!

If you're ready to take charge of your student loans, download apay!

Preview of step 3:

Making extra payments