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The average interest rate on refinanced undergraduate student loans increased last week, while graduate loan refinance rates fell, according to Credible. Student loan rates are generally low, so you may want to consider refinancing your student loan now before they go up.
Interest rates on private student loans are tied to a variable index rate and the borrowers’ credit scores. Mark Kantrowitz, president of PrivateStudentLoans.guru, says lenders may be waiting to see where interest rates on federal loans will start in July. This could help businesses decide what interest rates to charge so they can outprice Parent PLUS loans, for example.
Kantrowitz thinks rates will start to rise in June.
5-Year Variable Student Loan Refinance Rates
The average rate on 5-year variable college refinanced student loans is 5.07%, which is a substantial 0.95% increase from two weeks ago. In November, this rate was much lower, at 2.85%.
Variable five-year graduate rates have dropped significantly from two weeks ago. Currently, the average rate is 2.57%, down from 3.71% the previous week.
Fixed 10 Year Student Loan Refinance Rates
Refinance rates on 10-year fixed student loans for college students last week were up slightly from two weeks ago, with rates rising 0.10%. Undergraduate loan rates have increased 1.30% since last May.
Graduate loans have declined for two weeks, falling 0.05%. They have risen 1.11% from six months ago.
Student loan interest rates by credit score
it has a major effect on the rate you’ll get when you refinance. Generally, the better your credit score, the better rate you’ll receive. Here’s a list of 10-year student loan fixed rates by credit score:
How is a student loan refinanced?
Start the process by researching different companies and verifying their terms with each lender. Review the details of each offer and determine which rate and term length work best for you. You have to refinance through a private student loan lender, since you cannot refinance a student loan through the federal government.
Once you have decided on a company, you will provide documents that verify your finances and identity. After the lender gives you their final offer, you’ll need to agree to the terms and sign on the dotted line. Your new lender will then pay off your existing loan and you’ll be locked in with a new loan.
Should you refinance your student loan?
Refinancing your student loan may lower your interest rate, allow you to switch from a variable-rate loan to a fixed-rate loan, or change the length of your term. Changing the length of your term may allow you to spread payments over a longer period for smaller monthly payments, even though you’ll pay more in interest overall.
Be careful before you refinance a federal student loan. Even if you can get a lower rate when you refinance a federal loan, you’ll lose the key protections that come with federal loans. For example, you won’t qualify for the COVID-19-related student loan repayment pause, currently in effect through August 31, 2022, and federal student loan relief programs like Public Service Loan Forgiveness.
You also won’t be able to take advantage of certain payment options, such as income-driven repayment plans, which take into account your specific income and family size when determining monthly payments. In certain cases, very low-income borrowers may even pay as little as $0 per month.
Do you need a cosigner to refinance a student loan?
It depends on the lender. Some lenders require one, while others recommend one to increase your chances of qualifying for a loan. You can also get a better rate with a cosigner.
In general, to get a loan without a cosigner, you’ll need a strong credit score, a reliable payment history, and a consistent source of income.