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Get familiar with student loan interest rates

What are the different types of student loan interest rates?

When it comes to financing your education, understanding student loan interest rates is crucial. Interest rates are the cost of borrowing money, expressed as a percentage of the loan amount. They can significantly impact the total amount you’ll repay over the life of your loan. In this article, we’ll tell you about the different types of school loan interest rates available and what we recommend and offer at MPOWER Financing.

There are two main types of interest rates for student loans:

  • Fixed interest rates: These rates remain the same throughout the life of the loan. They provide predictability in your repayment plan as your monthly payments stay consistent.
  • Variable interest rates: These rates can change over time based on market conditions. While they can start lower than fixed rates, they could increase in the future, making your payments less predictable.
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How to choose between different student loan interest rates

Choosing the right student loan interest rate type can be a daunting task, especially for international students unfamiliar with the financial landscape in the U.S. or Canada. Both fixed and variable interest rates have advantages and disadvantages, and the best choice depends on your circumstances and financial goals.

Fixed interest rates
Fixed-rate student loans remain the same throughout the life of the loan. This predictability makes budgeting easier as your monthly payment will not change.

Pros of fixed interest rates:

  • Predictable payments: Your monthly payment will remain the same for the life of the loan, making it easier to budget every month.
  • No chance of a rate increase: You’ll know exactly how much interest you’ll pay if you stick to the repayment plan – there’s no chance that your interest rate and costs will increase over time.
  • Lower interest rates, at times: If market rates are relatively low, you can maximize your savings by locking in a low, fixed interest rate instead of a variable rate that’s likely to increase.

Cons of fixed interest rates:

  • Rates may start out higher: While variable rates can increase over time, you may pay more in the beginning with a fixed interest rate.
  • No chance of your rate going down: While variable rates can go up, the opposite is also true. A fixed-rate loan, on the other hand, won’t decrease over time.

Variable interest rates
Variable interest rates, on the other hand, can fluctuate over time based on market conditions. This means your monthly payments could rise and fall according to global financial conditions.

Pros of variable interest rates:

  • Start out lower than fixed rates: If interest rates are high, a lower rate may be available and would lead to lower payments and less interest owed in the short term.
  • Interest rates can go down: If you believe that interest rates will go down over time, a variable-rate loan allows you to take advantage of those decreases without needing to refinance your loan.

Cons of variable interest rates:

  • Budgeting can be difficult: With fluctuating payments, it can be challenging to budget for student loan payments and other expenses.
  • Payments can become unaffordable: If rates increase significantly, it can become difficult to afford your monthly payments.

In most cases, it makes sense for international students to opt for a fixed interest rate student loan. However, if you can pay off the loan within a few years and won’t be impacted too much by the fluctuating rate, a variable rate could be a viable option.

Remember, the choice between fixed and variable rates depends on your risk tolerance, budget and preferences. Take your time to research and understand both options and how they might impact you.

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What are MPOWER student loan interest rates?

Student loan interest rates might come across as complex, with unfamiliar terms and jargon. MPOWER Financing strives to demystify international student financing, aiming for clarity and transparency. You can find the latest MPOWER interest rate information on our Loan Payment Examples page.

An interest rate is a percentage of the loan principal, while an annual percentage rate (APR) encompasses the interest plus any fees for the loan each year. The APR allows you to make a full comparison of a loan’s interest and fees by annualizing the full cost of the loan.

It’s generally advised for international students to steer clear of the uncertainty tied to variable interest rates, leaning toward fixed rates instead.

What to know about refinancing your student loan with MPOWER Financing

As an international student, it can be tricky to refinance student loans from U.S. lenders. Many lenders require that you have good credit and apply with a U.S.-based cosigner, two criteria that are often difficult for international students to meet.

However, MPOWER Financing provides more flexibility and realistic refinancing eligibility requirements. To qualify for student loan refinancing with MPOWER, you must:

  • Live in the U.S.
  • Have worked full time in the U.S. for a minimum of three months after graduation
  • Have two or more years of work authorization
  • Have a valid student visa (such as an H1-B or F-1 visa while on Optional Practical Training (OPT) temporary employment or be a U.S. citizen, refugee or asylum seeker

MPOWER offers a refinancing loan interest rate of 11.74% (12.69% APR), which includes a 0.25% discount when applicants set up automatic payments. This fixed interest rate means you don’t have to worry about the rate increasing over the life of your loan.

You’ll also switch to a 10-year repayment term if you refinance with MPOWER. If you can afford to pay back your student loans faster, MPOWER lets you make extra payments with no prepayment penalty.

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Why MPOWER?

MPOWER Financing strives to make your study abroad dreams a reality. From offering no collateral, no cosigner student loans to a variety of international scholarships, the MPOWER team seeks to reduce financial burdens associated with international study programs.

In addition, MPOWER is not just concerned with helping you finance your education as an international student. The support goes beyond financial assistance and is all about helping aspiring leaders every step of the way. MPOWER wants to support future leaders throughout their academic journey. That’s why MPOWER offers its Path2Success career strategy services to help students and alumni manage their career growth.

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FAQs

What are the different types of student loan interest rates?

Student loan interest rates depend on whether the loan has a variable or fixed rate. Variable interest rate loans, also known as floating rate loans, have interest rates that change due to market fluctuations. A fixed-rate student loan gives borrowers a consistent monthly payment amount.

How can I reduce my existing student loan interest rate?

Refinancing an existing student loan is one way to reduce interest rates and make loan payments more affordable. This requires exchanging your existing student loan for a new one with restructured rates and terms. Depending on the lender, you could qualify for better rates and terms.

Before refinancing, review your current lender’s terms, how a cosigner or collateral might be affected and whether you qualify for employer assistance. Refinancing student loans doesn’t make sense for every borrower in every situation, so be sure to do a thorough review.

What are MPOWER’s student loan interest rates?

Our international education loans come with a fixed rate that you can count on staying the same during the life of your loan. See more on our rates and take the next step.

DISCLAIMER – Subject to credit approval, loans are made by Bank of Lake Mills or MPOWER Financing, PBC. Bank of Lake Mills does not have an ownership interest in MPOWER Financing. Neither MPOWER Financing nor Bank of Lake Mills is affiliated with the school you attended or are attending. Bank of Lake Mills is Member FDIC. None of the information contained in this website constitutes a recommendation, solicitation or offer by MPOWER Financing or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.

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