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The average interest rate on a 10-year fixed-rate student loan rose last week. For many borrowers, that means rates continue to be low enough to make student loans a good choice, especially if you have good credit.
From January 9 to January 14, the average fixed interest rate on a 10-year private student loan was 7.41% for borrowers with a score of 720 or better who pre-qualified on the market. Credible.com student loans. On a five-year variable rate loan, the average interest rate is 8.90% in the same population, according to Credible.com.
Target: Best Private Student Loans
The fixed rate on 10-year loans last week rose 0.34% to 7.41%. The week before, the average stood at 7.07%.
Borrowers in the market for a student loan now can get a higher rate than they did last year. At this time last year, the 10-year fixed rate was 6.68%, which is 0.73% lower than today.
If you take out $20,000 in student loans today, you’ll pay $236 a month and about $8,376 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Variable rate loans
Last week, the rate of five-year student loans increased to 8.90% from 8.46% the week before.
In addition to fixed rates, interest rates vary over the term of the loan. Variable rates can start lower than fixed rates, especially during periods of generally low rates, but can increase over time.
Lenders often offer a choice between fixed and variable interest rates. Fixed rates may be safer for students, but if your income is stable and you plan to pay off your loan quickly, choosing a variable rate loan may be worth it.
Let’s say you took out a $20,000 five-year loan with a variable interest rate of 8.90%. You pay about $414 on average per month. You will pay approximately $4,852 in total interest over the life of the loan. Keep in mind that since interest rates fluctuate, they can fluctuate up or down from month to month.
Shopping for Private Student Loans
When comparing student loan options, look closely at the total cost of the loan. This includes interest and fees. It’s also important to consider what kind of help the lender will offer if you can’t afford your payments.
Remember that the best rates are only available to those with good or good credit.
Experts often recommend that you borrow more than you earn your first year out of college. While some lenders limit the amount of money you can borrow each year, others do not. When comparing loans, determine how the loan will be spent and how much it will cost.
Getting a private student loan
If you reach the annual credit limit for federal student loans or if you don’t qualify for them, private student loans may be a good option. But consider a federal student loan as your first choice since the interest rate is usually low. You’ll also find more repayment and forgiveness options with federal student loans.
Getting a student loan usually involves applying directly through a non-federal agency, such as a bank, credit union or online. You may also be able to get a student loan through a nonprofit organization, state agency or college.
It is important to note that you will need a valid signature if your history is limited, as students often are.
When applying for a private student loan, consider the following:
- Your qualifications. Private student loans are credit-based. Lenders typically require a credit score in the high 600s. This is where having a co-signer can be very useful.
- Where to apply. You can apply directly on the lender’s website, by mail or by phone.
- It’s your choice. Look at what each lender has to offer and compare interest rates, terms, future monthly payments, origination fees and late fees. Also, check if the lender offers a mutual termination so that the borrower can get out of the loan.
How to Fix Your Interest
The rate you get depends on whether you are getting a fixed or variable loan. Rates are, in part, based on your credit score—those with higher credit scores tend to get lower rates. But your rate is based on other factors as well. Credit history, income and even the degree you are working and your job can play a role.