February 13, 2024—Loan Rates Start To Increase – Forbes Advisor – Technologist

Rates on 10-year fixed-rate private student loans jumped up last week. Despite the rise, if you’re interested in getting a private student loan, you can still get a relatively low rate.

The average fixed interest rate on a 10-year private student loan was 9.12% from February 5 to February 10. 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 was 7.64% among the same population, according to Credible.com.

These rates are accurate as of February 5, 2024.

Related:  Best Private Student Loans

Fixed-rate Loans

The average fixed rate on 10-year loans last week increased by 1.45% to 9.12%. The week prior, the average stood at 7.67%.

Borrowers currently in the market for a private student loan will receive a higher 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 8.59%, 0.53% lower than today’s rate.

If you were to finance $20,000 in student loans at today’s average fixed rate, you’d pay around $255 per month and approximately $10,558 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.

Variable-rate Loans

The average rate on five-year variable student loans moved up by 2.28% last week. Now it sits at 7.64%.

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 7.64%. You’d pay about $402 on average per month. You’d pay approximately $4,125 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

How To Get 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 good 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.

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.

Comparing 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, take 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.