Any time that you take out a loan you have to make sure that you are getting the best interest rate possible, this is especially true of a student loan. Since it will likely take you years to pay off your student loans even small differences in interest rates can really add up. Knowing what kinds of things influence you your student loan rates will help to ensure that you get the best possible rate so that you are not paying more than you have to for your loans.

The biggest thing that influences the rates that you have to pay on student loans is what interest rates are doing in general. This is largely determined by the Federal Reserves prime rate. That is the rate that banks have to pay when they borrow money from the government. This rate goes up and down depending on what kind of a monetary policy the Federal Reserve is trying to implement. Currently they are trying to stimulate the economy by keeping interest rates low. This is good news if you are in need of a loan.

The other big factor in determining how much you pay in interest on your student loans is the governments current policy on the subject. The banks are not particularly thrilled about giving out student loans since they are lending to people with little money and short credit histories. In order to get around this problem the government usually has to offer them incentives to make the loans. The interest rate is going to be heavily affected by what kind of incentives the government is offering to banks. Unfortunately right now with the government being broke they are not really offering the kind of incentives that they used to, this has driven up interest rates on student loans.

Where you get your student loans will also have an impact on the interest rate that you will be able to get. The lowest rates by far are on the loans offered directly by the government. These are known as Stafford or Perkins loans depending on which program you are applying for. Unfortunately there are limits on how much you can borrow through these programs so most students find it necessary to get additional funding from private lenders. Even here student student loan interest rates can vary pretty dramatically so you are going to want to shop around to make sure that you are getting the best rate that you can.

One factor that does affect your interest rates on student loans is your credit rating, however since most students have a very limited credit history and income there is really not a lot of variation here. Most students will end up paying about the same rate based on their credit and it will usually be quite a bit higher than other people would have to pay. There is really very little that you can do about this so it is not really a factor that you are going to need to worry about.

If you are attending a school that has a very high tuition rate you may be able to qualify for what are known as PLUS loans. These are loans that recognize that the regular student loans program does not offer enough funding for students attending very high priced colleges. The odd thing about these loans is that they actually have lower interest rates than those offered by most of the regular student loans programs. The reason for this seems to be that graduates of these high priced schools tend to get better jobs and are more likely to pay off their student loans than graduates of state colleges.

While the actual interest rate is an important consideration when you are looking for student loans there is another important factor that will have a large impact on what the loan ends up costing. That is when the interest starts to accrue and when you have to start paying the loan back. Some student loans are subsidized by the government which means that they will pay the interest on the loan while you are in school plus for the first six months after you graduate. Since this amounts of four and half years worth of interest the amount that you save can be quite substantial. With loans that are not subsidized the interest will start to accrue right away. Obviously if you can get a loan this subsidized this would be a far better option.