The average interest rate on all refinanced student loans went up slightly last week, according to Credible. Still, student loan rates are relatively low, so you may think about refinancing your student loan today.
Interest rates on private student loans are tied to a variable index rate and borrowers’ credit scores. Lenders base rates on a 1-month or 3-month average of the index rate.
As a result, student loan rates might not rise as rapidly as the federal funds rate, says Mark Kantrowitz, president of PrivateStudentLoans.guru.
“Lenders may also be waiting to see where federal loan interest rates will be starting in July, for competitive reasons — for example, to try to undercut Parent PLUS loans on price,” Kantrowitz says. “The lenders are also aware that the payment pause and interest waiver and the prospect of broad student loan forgiveness are acting as a drag on the private refi market.”
Kantrowitz expects rates to start increasing in June.
5-year variable student loan refinancing rates
The current rate for 5-year variable undergraduate refinanced student loans is 4.12%, up 0.28% from two weeks ago. Six months ago, this rate was much lower, at 2.79%.
Five-year graduate variable rates are also up slightly since two weeks ago. Currently, the average rate is 3.57%, up from 3.37% the week prior.
10-year fixed student loan refinancing rates
Refinance rates on 10-year fixed student loans this past week ticked up slightly from two weeks ago, with undergraduate rates increasing by 0.13%. Rates on undergraduate loans have increased by 1.08% from last year.
Graduate loans have barely budged from two weeks ago, rising by 0.04%. They are up by 1.21% since last October.
Student loan interest rates by credit score
The rate you receive when you refinance your student loan is significantly impacted by your
. Usually, the better your credit score, the lower rate you’ll get. Below, you’ll find 10-year fixed student loan rates by credit score:
What’s the benefit of refinancing a student loan?
Refinancing your student loan may qualify you for a better rate than the one you currently have. You also have the ability to change from a variable-rate loan to a fixed-rate loan, or switch up your term length. By selecting a different term length, you may be able to spread out payments over a longer period for smaller monthly payments, though you’ll pay more in total interest.
How do you refinance a student loan?
To begin refinancing, research different companies and check your terms with each lender. Look over the details of each offer and figure out which rate and term length is best for you. When you check your rates, lenders will often perform a soft credit check, which doesn’t hurt your credit score.
You’ll need to apply to refinance through a private student loan lender, as you aren’t able to refinance a student loan through the federal government.
Once you’ve picked out a company, you’ll fill out its application and provide documents that verify your finances and identity. After the lender gives you its final offer, you’ll 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 go with a new loan.
How do I choose between a 5-year and 10-year loan?
Both types of loans are right for different types of borrowers.
If you want a lower interest rate and you’re able to pay off your loan more quickly, a 5-year loan term could be a great choice. You’ll save money in interest and will free up money to put toward your other financial goals faster.
A 10-year loan term will cost you more overall, but you’ll make smaller monthly payments. This may make it easier for you to repay your loan if you’re on a tight budget.