Private Student Loan Rates: January 23, 2024—Loan Rates Jump Up

The average interest rate on 10-year fixed-rate private student loans rose last week. For borrowers pursuing private loans to fill in gaps to pay for higher education expenses, rates remain relatively low for borrowers with solid credit.

According to Credible.com, from January 15 to January 20, the average fixed interest rate on a 10-year private student loan was 8.07%. It was 10.77% on a five-year variable-rate loan. That’s for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace.

These rates are accurate as of January 15, 2024.

Fixed-rate Loans

Last week, the average fixed rate on a 10-year loan jumped by 0.46% to 8.07%. The average stood at 7.61% the week prior.

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 7.41%, 0.66% lower than today’s rate.

If you were to finance $20,000 in student loans at today’s average fixed rate, you’d pay around $243 per month and approximately $9,207 in total interest over 10 years, in general.

Variable-rate Loans

Last week, rates on variable five-year student loans moved up, reaching 10.77% from 7.49% the week prior.

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.

Financing a $20,000 five-year private loan at 10.77% would yield a monthly payment of approximately $433. A borrower would pay $5,953 in total interest over the life of the loan. But the rate in this example is variable, and it could move up or down each month.

Shopping for 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.

How much should you borrow? Experts generally recommend borrowing no more than you’ll earn in your first year out of college. How much can you borrow? Some lenders cap the amount you can borrow each year, while others don’t. When you’re shopping around for a loan, take to lenders about how the loan is disbursed and what costs it will cover.

Getting 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 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.

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.

Keep in mind that undergraduates with limited credit history often need 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.

The Rate You’ll Receive

Lenders offering private student loans generally offer both fixed and variable interest rates. These rates are, in part, based on your creditworthiness. Generally, the higher your credit score, the lower the interest rate you’ll receive. But credit history, income, the degree you’re working on and your career can factor into the interest rate you receive as well.

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