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Rates on 10-year fixed-rate private student loans moved down last week. If you’re interested in picking up a private student loan, you can still get a relatively low rate.
According to Credible.com, from April 1 to April 6, the average fixed interest rate on a 10-year private student loan was 7.37%. It was 7.10% 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 April 1, 2024.
Related: Best Private Student Loans
Fixed-Rate Loans
Last week, the average fixed rate on 10-year loans slipped by 1.66% to 7.37%. The week prior, the average stood at 9.03%.
Borrowers currently in the market for a private student loan will receive a lower 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 7.43%, 0.06% higher than today’s rate.
If you were to finance $20,000 in student loans at today’s average fixed rate, you’d pay around $236 per month and approximately $8,326 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Variable-Rate Loans
Last week, rates on variable five-year student loans moved up, reaching 7.10% from 6.29% the week prior.
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.
Financing a $20,000 five-year private loan at 7.10% would yield a monthly payment of approximately $397. A borrower would pay $3,818 in total interest over the life of the loan. But the rate in this example is variable, and it could move up or down each month.
Related: How To Get A Private Student Loan
How To Get 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.
It’s important to note that you’ll need a qualified co-signer if you have limited credit history, as undergraduates often do.
When applying for a private student loan, take into consideration the following:
- Your qualifications. Private student loans are credit-based. Lenders typically require a credit score in the higher 600s. This is where having a co-signer can be particularly beneficial.
- Where to apply. You can apply directly on the lender’s website, via mail or over the phone.
- 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
First, take a look at the loan’s overall cost. Consider both interest rate and fees. Also, look at the type of help each lender offers if you’re not able to afford your 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, talk to lenders about how the loan is disbursed and what costs it will cover.
How Your Interest Rate Is Determined
The rate you receive depends on whether you’re getting a fixed or variable loan. Rates, in part, are based on your creditworthiness—those with higher credit scores often get the lowest rates. But your rate is based on other factors as well. Credit history, income and even the degree you’re working on and your career can play a part.