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Last week, the average interest rate on 10-year fixed-rate private student loans inched down. That’s welcome news for borrowers interested in applying for private student loans.

From July 1 to July 6, the average fixed interest rate on a 10-year private student loan was 7.48% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace. On a five-year variable-rate loan, the average interest rate was 11.17% among the same population, according to Credible.com.

These rates are accurate as of July 8, 2024.

Related: Best Private Student Loans

Fixed-Rate Loans

The average fixed rate on 10-year private student loans last week declined by 0.39% to 7.48%. The week prior, the average stood at 7.87%.

Borrowers currently in the market for a private student loan will receive a lower 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 7.61%, 0.13% higher than today’s rate.

Let’s say you financed $20,000 in student loans at today’s average fixed rate. You’d pay around $237 per month and approximately $8,463 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.

Variable-Rate Loans

Last week, the average rate on a variable five-year student loan fell to 11.17% on average from 11.31%.

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 11.17%. You’d pay about $437 on average per month. You’d pay approximately $6,193 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

The Rate You’ll Receive

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.

Applying for 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 choice. 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.

Getting a private student loan generally involves applying directly through a non-federal lender, such as a bank, credit union or online entity. You may also be able to get a private student loan through a nonprofit organization, state agency or college.

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.

How To Compare 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.

Remember, those with good or excellent credit typically get the best rates.

Experts generally recommend that you borrow no more than what you’ll earn in your first year out of college. While some lenders cap the amount of money you can borrow each year, others don’t. When comparing loans, figure out how the loan will be disbursed and what costs it covers.

Categorized in:

Daily rates, Student Loans,

Last Update: July 9, 2024