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How to Prevent Student Loan Interest Rates from Increasing

Stopping your lender from raising rates is tricky, but there are a few ways to prevent your interest rates from going up.

Written By: Michael P. Lux, Esq.


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During times of inflation, many student loan borrowers will see increases in their interest rates and monthly payments.

This is one of the most frustrating aspects of living with variable-rate student loans.

Fortunately, borrowers can use several different tactics to prevent interest rate increases.

Preventing Private Student Loan Rate Increases

If the interest rate on your student loan is climbing, the odds are pretty good that it is a private student loan. The government hasn’t issued a variable-rate federal student loan since 2006.

If your private loan has a variable rate, one option to prevent future rate increases is to refinance into a fixed-rate loan.

The bad news on refinancing is that not all borrowers can qualify. A solid credit score and income are usually required. The good news is that many borrowers can refinance into a fixed-rate loan and get a lower interest rate.

As of April 2024, the following lenders offer the lowest rates on fixed-rate loans:

RankLenderLowest RateSherpa Review
T-1Splash Financial5.19%*Splash Financial Review
T-1Earnest5.19%Earnest Review
3ELFI5.48%ELFI Review

For the borrowers looking for a fixed-rate and low monthly payment, a 20-year fixed-rate loan is usually the best choice. The following lenders offer the best 20-year loans:

RankLenderLowest RateSherpa Review
1Splash Financial6.08%*Splash Financial Review
2ELFI6.64%ELFI Review

Sherpa Tip: Most refinance lenders will also refinance federal loans. However, refinancing a federal loan is risky because the debt is converted into a private loan.

Federal loans come with valuable benefits for borrowers, and refinancing permanently eliminates these borrower perks. As a result, borrowers should use extreme caution before refinancing their federal loans.

Dealing with Variable-Rate Federal Loans

If you happen to have a federal loan with a variable interest rate, the fix is relatively easy.

Federal direct consolidation will convert your variable-rate student loan into a fixed-rate loan.

The Department of Education will calculate your new interest rate based on the weighted average of your current loans, rounded to the nearest quarter percent. In other words, your rate won’t get much better or worse. It just becomes a fixed-rate loan instead of a variable loan.

Sherpa Tip: Consolidating your federal loans to lock in a fixed rate is one of the four reasons that many borrowers consolidate their loans.

However, it is worth noting that consolidation may not be the best choice for all borrowers. Make sure you understand the consequences of federal direct consolidation before making the move.

The Hard Way: The Brute Force Method to Deal with High Interest Rates

If the interest rate on a student loan is too high, eliminating the debt also eliminates the high interest rate.

Paying off a student loan in full isn’t a viable option for most borrowers.

However, if your interest rate has become an issue, it might be time to reprioritize your finances. Maybe you keep a little less in your emergency fund and pay down your balance. Perhaps the interest rate increase means you focus on repaying your student loan instead of your car loan.

Each person has different resources and different challenges. That said, if increasing interest rates on student loans become a major issue, knocking out that debt should become a higher priority.

Getting the Government to Prevent Interest Rates from Increasing

At present, federal interest rates are currently 0%. However, this 0% interest rate is a temporary measure to help borrowers manage their debt during the pandemic.

A return to normal federal interest rates appears inevitable. However, I don’t think it should be. I believe that federal student loan interest rates should be permanently set to 0%.

If you share this opinion and want to prevent the government from charging interest on your federal loans, take a few minutes to reach out to your elected representatives. The right phone call or email can make a huge difference.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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