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According to Credible, average interest rates on most refinanced student loans have been rising for the past two weeks. Only the five-year variable graduation rates decreased. Five-year rates on undergraduate loans have increased significantly, and rates on all 10-year loans are up.
Over the next school year, federal student loan rates will increase by the largest amount since 2005-06. These new rates won’t directly impact private student loan rates, but private rates may go up because they don’t have to stay so low to compete 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 rise so significantly 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 rate undergraduate student loan refinance rates soared last week, rising 1.40% from two weeks ago to 4.47%.
5-year variable graduate loan refinance rates are actually down from two weeks ago. Currently, the average rate is 3.24%.
Rates for both loan types are up from a year ago.
Fixed 10-Year Student Loan Refinance Rates
Refinance rates for 10-year fixed student loans last week rose slightly from two weeks ago. Undergraduate rates rose 21 basis points, while graduate rates rose 37 basis points. Rates have increased significantly over the past six months.
Student loan interest rates by 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?
To get started with refinancing, check out 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 because you cannot refinance a student loan through 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 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.
Loan over 5 years vs 10 years
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 be more expensive overall, but you’ll make lower monthly payments. This can make it easier for you to repay your loan if your budget is tight.