London Institute of Banking & Finance (LIBF) Practice Exam

Lower interest rates reduce the cost of borrowing because interest is the charge for using someone else’s money. A student loan accrues interest, so when rates are low, the amount of interest added to the loan each year is smaller, making the total amount repaid over the life of the loan cheaper, all else being equal. The total cost can also be influenced by how long you take to repay—a longer term can increase total interest even at low rates—but the rate itself being lower is the primary reason the loan becomes cheaper. So the statement is true.