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Rates on 10-year fixed-rate private student loans fell 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 September 16 to September 21, the average fixed interest rate on a 10-year private student loan was 7.99%. It was 10.31% 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 September 16, 2024.
Related: Best Private Student Loans
Fixed-Rate Loans
The average fixed rate on 10-year private student loans last week declined by 0.58% to 7.99%. The week prior, the average stood at 8.57%.
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 8.00%, 0.01% higher than today’s rate.
Let’s say you financed $20,000 in student loans at today’s average fixed rate. You’d pay around $243 per month and approximately $9,106 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 10.31% from 8.61% 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.
Let’s say you financed a $20,000 five-year loan with a variable interest rate of 10.31%. You’d pay about $428 on average per month. You’d pay approximately $5,680 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
Shopping for Private Student Loans
When comparing private student loan options, take a close look at the overall cost of the loan. This includes the interest rate and fees. It’s also important to consider the type of help the lender offers if you can’t afford your payments.
Remember, those with good or excellent credit typically get the best rates.
Experts generally recommend that you borrow no more than what you’ll earn in your first year out of college. While some lenders cap the amount of money you can borrow each year, others don’t. When comparing loans, figure out how the loan will be disbursed and what costs it covers.
Getting a Private Student Loan
If you reach the annual borrowing limits for federal student loans or if you’re otherwise ineligible for them, private student loans may be a decent option. But consider a federal student loan as your first option since the interest rates are typically lower. You’ll also receive more liberal repayment and forgiveness options with federal student loans.
When shopping for a private student loan, you’ll generally need to apply directly through a non-federal lender. This includes banks, credit unions, nonprofit organizations, state agencies, colleges and online entities.
If you’re an undergraduate with limited credit history, you’ll generally need to apply with 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.
The Rate You’ll Receive
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.