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Average interest rates on most refinanced student loans have been rising for two weeks, according to Credible. Only the variable rates of five-year graduates are down. Five-year rates on college student loans have risen substantially, and rates on all 10-year loans have gone up.
This upcoming school year, federal student loan rates will increase by the most significant amount since 2005-06. These new rates won’t have a direct impact on private student loan rates, but private rates may go up since they don’t have to stay as low to compete with federal loan rates.
Laurel Taylor, CEO and founder of student debt fintech company 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. Still, Taylor says borrowers shouldn’t worry too much about rising federal rates.
“The monthly payment impact is relatively minor, adding up to less than $5 per month and less than $400 over the standard 10-year payment on a typical $5,500 annual loan for a college student,” says Taylor.
5-Year Variable Student Loan Refinance Rates
Refinancing rates on 5-year variable-rate undergraduate student loans soared last week, rising 1.40% from two weeks ago to hit 4.47%.
Refinance rates on 5-year variable graded loans are actually down compared to two weeks ago. Currently, the average rate is 3.24%.
Rates on both types of loans are higher than they were a year ago.
Fixed 10 Year Student Loan Refinance Rates
Last week, 10-year fixed student loan refinance rates were up a bit from two weeks ago. Undergraduate rates have increased 21 basis points, while graduate rates have increased 37 basis points. Rates have risen substantially from six months ago.
Student loan interest rates by credit score
significantly affects the rates you receive. You’ll often get a better rate the higher your credit score. Here’s a list of 10-year student loan fixed rates by credit score:
Why refinance a student loan?
You may qualify for a better rate when you refinance your student loans. You’ll also be able to switch from a fixed-rate loan to a variable-rate loan, or change the length of your term. By choosing a different term length, you may be able to spread costs over a long period of time for smaller monthly payments, even though you’ll pay more in total interest.
How is a student loan refinanced?
To start refinancing, shop around for different companies and check their terms with each lender. Review the details of each offer and find out which rate and term length is best for you. When you check your rates, lenders often do a soft credit check, which doesn’t affect your credit score.
You will need to apply for refinancing through a private student loan lender, as you cannot refinance a student loan through the federal government.
Once you’ve chosen a company, you’ll complete your application and 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 ready to take out a new loan.
5-year vs. 10-year loan
If you want a lower interest rate and can pay off your loan faster, a 5-year loan term might be a great option. You’ll save money on interest and free up money for your other financial goals more quickly.
A 10-year loan term will be more expensive overall, but will make smaller monthly payments. This can make it easier for you to pay off your loan if you’re on a tight budget.
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