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Rates on 10-year fixed-rate private student loans rose last week. Despite the rise, if you’re interested in getting a private student loan, you can still get a relatively low rate.
According to Credible.com, from June 17 to June 22, the average fixed interest rate on a 10-year private student loan was 7.97%. It was 11.14% on a five-year variable-rate loan. That’s for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace.
These rates are accurate as of June 17, 2024.
Related: Best Private Student Loans
Fixed-rate Loans
Last week, the average fixed rate on a 10-year loan jumped by 0.21% to 7.97%. The average stood at 7.76% the week prior.
Borrowers currently in the market for a private student loan will receive a higher rate than they would have at this time last year. At this time last year, the average fixed rate on a 10-year loan was 7.39%, 0.58% lower than today’s rate.
Let’s say you financed $20,000 in student loans at today’s average fixed rate. You’d pay around $242 per month and approximately $9,081 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Variable-rate Loans
The average rate on five-year variable student loans moved up by 0.29% last week. Now it sits at 11.14%.
In contrast to fixed rates, variable interest rates fluctuate over the course of a loan term. Variable rates may start lower than fixed rates, especially during periods when rates are low overall, but they can rise over time.
Private lenders often offer borrowers the option to choose between fixed and variable interest rates. Fixed rates may be the safer bet for the average student, but if your income is stable and you plan to pay off your loan quickly, it could be beneficial to choose a variable loan.
Let’s say you financed a $20,000 five-year loan with a variable interest rate of 11.14%. You’d pay about $436 on average per month. You’d pay approximately $6,175 in total interest over the life of the loan. Keep in mind that since the interest is variable, it could fluctuate up or down from month to month.
Related: How To Get A Private Student Loan
How Lenders Determine Your Rate
Lenders offering private student loans generally offer both fixed and variable interest rates. These rates are, in part, based on your creditworthiness. Generally, the higher your credit score, the lower the interest rate you’ll receive. But credit history, income, the degree you’re working on and your career can factor into the interest rate you receive as well.
Getting a Private Student Loan
Private student loans may be a good option if you reach the annual borrowing limits for federal student loans or if you’re otherwise ineligible for them. You should consider a federal student loan as your first option, as interest rates are generally lower and you’ll enjoy more liberal repayment and forgiveness options than with a private loan.
To get a private student loan, you’ll generally need to apply directly through a non-federal lender. You can find private student loans through banks, credit unions and online entities. Nonprofit organizations, state agencies and colleges also offer loans.
Keep in mind that undergraduates with limited credit history often need a co-signer who can meet the lender’s borrowing requirements.
Here’s what to consider when applying for a private student loan:
- Make sure you qualify.Private student loans are credit-based, and lenders typically require a credit score in the high 600s. This is why having a co-signer can be particularly beneficial.
- Apply directly through lenders.You can apply directly on the lender’s website, via mail or over the phone.
- Compare your options.Look at what each lender offers and compare the interest rate, term, future monthly payment, origination fee and late fee. Also, check to see if the lender offers a co-signer release so that the co-borrower can eventually come off of the loan.
How To Compare Private Student Loans
When shopping for a private loan, consider the overall cost of the loan, including interest rate and fees. You may also want to consider the type of assistance each lender offers if you’re not able to make your loan payments.
If you have good or excellent credit, you have a better chance at landing the best interest rates.
How much should you borrow? Experts generally recommend borrowing no more than you’ll earn in your first year out of college. How much can you borrow? Some lenders cap the amount you can borrow each year, while others don’t. When you’re shopping around for a loan, take to lenders about how the loan is disbursed and what costs it will cover.