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Interest rates on refinanced student loans are mixed..
The average fixed interest rate on a 10-year refinance loan fell to 7.32% during the week of April 29. That’s for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace. The average interest rate on a five-year variable-rate loan increased to 9.60% among the same population, according to Credible.com.
These rates are accurate as of April 29, 2024.
Related: Best Student Loan Refinance Lenders
Fixed-Rate Loans
Last week, the average fixed rate on 10-year refinance loans declined by 0.15 percentage points to 7.32%. The week before, the average stood at 7.47%.
Fixed interest rates don’t change throughout a borrower’s loan term. That means borrowers refinancing now will lock in a rate higher than one they would have received this time last year. At this time last year, the average fixed rate on a 10-year refinance loan was 6.94%, 0.38 percentage points lower than today’s rate.
A borrower who refinances $20,000 in student loans to today’s average fixed rate would pay around $236 per month and approximately $8,263 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Variable-Rate Loans
Last week, rates on variable five-year refinance student loans moved up, reaching 9.60% from 7.00% the week before.
In contrast to fixed rates, variable interest rates fluctuate over the course of a loan term according to market conditions and the financial index they’re tied to. Many refinance lenders recalculate rates monthly for borrowers with variable-rate loans, but they typically limit how high the rate can go—to 18%, for instance.
Let’s say you refinanced an existing $20,000 loan to a five-year loan with a variable interest rate of 9.60%. You’d pay about $421 on average per month. You’d pay approximately $5,261 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: Should You Refinance Student Loans?
When Should You Refinance Student Loans?
Most lenders require borrowers to complete their degree before refinancing—though not all—so in most cases, wait to refinance until you’ve graduated. You’ll also need a good or excellent credit score and stable income in order to access the lowest interest rates.
If you don’t yet have strong enough credit or income to qualify, you can either wait and refinance later or ask a friend or relative to be a co-signer. The co-signer you choose should be aware that they’ll be responsible for making student loan payments if you no longer can and that the loan will appear on their credit report.
Steps to Get the Best Student Loan Refinance Rates
The best student loan refinance rates typically go to borrowers with strong credit. To get the best rate, take some time to improve your credit before you apply. Paying down debts, reducing your credit utilization ratio and disputing any errors on your credit report can boost your credit.
Another option is applying for student loan refinance with a co-signer. If you can add a creditworthy co-signer to your application, you might qualify for a better interest rate. However, remember that your co-signer will share responsibility for the loan.
Finally, compare offers from multiple lenders. Each lender sets its own rates and terms, so shopping around can help you find a student loan refinance offer with the best rate.
Other Student Loan Refinancing Features to Consider
When you refinance federal student loans to a private loan means you’ll lose access to some federal loan benefits. You’ll no longer have access to features like:
You may not need these programs if you have a stable income and plan to pay off your loan quickly.
If you do need the benefits of those programs, you could refinance only your private loans, or just a portion of your federal loans.