Personal Finance Insider writes about products, strategies, and advice to help you make smart decisions with your money. We may receive a small commission from our partners, such as American Express, but our reports and recommendations are always independent and objective. Terms apply to offers listed on this page. Read our editorial standards.
According to Credible, average interest rates on five-year refinanced variable student loans have been falling for the past two weeks. Five-year rates on undergraduate loans cratered, while five-year rates for graduates fell only slightly. 10-year fixed loan rates have risen in the past two weeks
Over the next school year, federal student loan rates will increase by the highest amount since 2005-06. These new rates won’t have a direct impact on private student loan rates, but private rates may go up because they don’t have to stay so low to be competitive with federal loan rates.
Laurel Taylor, CEO and founder of student debt fintech FutureFuel.io, says that over the past two decades, it has been rare for rates to increase so dramatically in such a short period of time. However, Taylor says borrowers shouldn’t worry too much about rising federal rates.
“The impact on monthly payments is relatively minor, totaling less than $5 per month and less than $400 over the standard 10-year repayment on a typical $5,500 annual loan for an undergraduate student,” said Taylor.
Variable 5-Year Student Loan Refinance Rates
5-year variable undergraduate student loan refinance rates fell last week, falling 1.56% from two weeks ago to 3.07%.
5-year variable graduate loan refinance rates are also down from two weeks ago. Currently, the average rate is 3.56%.
Fixed 10-Year Student Loan Refinance Rates
Refinance rates for 10-year fixed student loans last week rose from two weeks ago. Undergraduate rates rose 22 basis points, while graduate rates rose 14 basis points. Rates have increased significantly over the past six months.
Student loan interest rates by credit score
Your credit score has a significant impact on the rates you receive. You will often get a better rate the higher your credit score. Below, we’ve listed the 10-year fixed student loan rates by credit score:
Why refinance a student loan?
You may qualify for a better rate when you refinance your student loans. You can also switch from a fixed rate loan to a variable rate loan or change the duration. By choosing a different term, you may be able to spread the costs over an extended period for smaller monthly payments, even though you will pay more total interest.
How to refinance a student loan
Start the refinancing process by checking your terms with different lenders. Consult the offers and determine the rate and duration that suits you best. When reviewing your rates, lenders usually do a soft credit check, which doesn’t hurt your credit score.
You will need to apply for refinance with a private student lender, as you cannot refinance a student loan with the federal government.
Once you have chosen a company, you will complete their application and provide documentation proving your finances and identity. Once the lender has made their final offer, you will need to sign the agreement and agree to the terms. Then your new lender will pay off your existing loan and you’ll be ready to start with a new loan.
Loan over 5 years vs 10 years
Each type of student loan is suitable for different borrowers.
If you want a better interest rate and can pay off your loan faster, a loan with a 5-year term could be a great choice. You’ll save money in interest and free up money to reach your other financial goals faster.
A 10-year loan term will cost you more in total, but you’ll make lower monthly payments. This can make it easier for you to repay your loan if your budget is tight.