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Rates on 10-year fixed-rate private student loans jumped up last week. Despite the rise, if you’re interested in getting a private student loan, you can still get a relatively low rate.
For borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace from February 26 to March 2, the average fixed interest rate on a 10-year private student loan was 8.90%. On a five-year variable-rate loan, the rate was 7.39%, according to Credible.com.
These rates are accurate as of February 26, 2024.
Related: Best Private Student Loans
Fixed-rate Loans
The average fixed rate on 10-year loans last week rose by 1.85% to 8.90%. The week prior, the average stood at 7.05%.
Borrowers currently in the market for a private student loan will receive a higher 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 7.87%, 1.03% lower than today’s rate.
Let’s say you financed $20,000 in student loans at today’s average fixed rate. You’d pay around $252 per month and approximately $10,272 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Variable-rate Loans
Average variable rates on five-year loans moved up last week, from 5.92% on average to 7.39%.
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 7.39%. You’d pay about $400 on average per month. You’d pay approximately $3,983 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
Comparing Private Student Loans
When shopping for a private loan, consider the overall cost of the loan, including interest rate and fees. You may also want to consider the type of assistance each lender offers if you’re not able to make your loan payments.
If you have good or excellent credit, you have a better chance at landing the best interest 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.
How To Get 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 decent option. 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.
To get a private student loan, you’ll generally need to apply directly through a non-federal lender. You can find private student loans through banks, credit unions and online entities. Nonprofit organizations, state agencies and colleges also offer loans.
It’s important to note that you’ll need a qualified co-signer if you have limited credit history, as undergraduates often do.
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 Lenders Determine Your Rate
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.
