The average interest rate on all refinanced student loans rose slightly last week, according to Credible. Still, student loan rates are relatively low, so you might want to consider refinancing your student loan today.
Interest rates on private student loans are linked to a variable indexed rate and the borrowers’ credit ratings. Lenders base their rates on a 1 or 3 month average of the index rate.
As a result, student loan rates may not rise as quickly as the federal funds rate, says Mark Kantrowitz, president of PrivateStudentLoans.guru.
“Lenders may also wait to see where federal loan interest rates start in July, for competitive reasons — for example, to try to lower the price of Parent PLUS loans,” Kantrowitz said. “Lenders are also aware that the payment pause and interest relief and the prospect of large student loan forgiveness are acting as a drag on the private refi market.”
Kantrowitz expects rates to start rising in June.
Variable 5-Year Student Loan Refinance Rates
The current 5-year variable refinanced undergraduate student loan rate is 4.12%, up 0.28% from two weeks ago. Six months ago, this rate was much lower, at 2.79%.
Variable rates for five-year graduates have also been up slightly for the past two weeks. Currently, the average rate is 3.57%, compared to 3.37% the previous week.
Fixed 10-Year Student Loan Refinance Rates
Refinance rates for 10-year fixed student loans last week rose slightly from two weeks ago, with undergraduate rates rising 0.13%. Undergraduate loan rates increased 1.08% from a year ago.
Graduate loans were barely budged from two weeks ago, rising 0.04%. They are up 1.21% since last October.
Student loan interest rates by credit score
The rate you receive when you refinance your student loan is greatly influenced by your
. Usually, the better your credit score, the lower the rate you will get. Below are the 10-year fixed student loan rates by credit score:
What is the advantage of refinancing a student loan?
Refinancing your student loan may qualify you for a better rate than you currently have. You also have the option of switching from a variable rate loan to a fixed rate loan or increasing the term of your loan. By selecting a different term, you may be able to spread the payments over a longer period for smaller monthly payments, although you will pay more total interest.
How to refinance a student loan?
To get started with refinancing, research different companies and check your terms with each lender. Review the details of each offer and determine the rate and term that works best for you. When you check your rates, lenders often do a soft credit check, which doesn’t hurt your credit score.
You will need to apply for refinancing through a private student lender, as you cannot refinance a student loan through the federal government.
Once you choose a company, you complete their application and provide documents that verify your finances and identity. Once the lender gives you their final offer, you will need to agree to the terms and sign on the dotted line. Then your new lender will pay off your existing loan and you’ll be ready to take out a new loan.
How to choose between a loan over 5 years and over 10 years?
Both types of loans suit different types of borrowers.
If you want a lower interest rate and are able to pay off your loan faster, a 5-year loan 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 overall, but you’ll make lower monthly payments. This can make it easier for you to repay your loan if your budget is tight.