Private Student Loan Rates: November 8, 2022—Loan Rates Edge Up
The average interest rate on 10-year fixed-rate private student loans inched up 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.
From October 31 to November 5, the average fixed interest rate on a 10-year private student loan was 7.71% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace. On a five-year variable-rate loan, the average interest rate was 8.37% among the same population, according to Credible.com.
Related: Best Private Student Loans
The average fixed rate on 10-year loans last week increased by 0.03% to 7.71%. The week prior, the average stood at 7.68%.
Borrowers in the market for a private student loan now can 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 6.54%, 1.17% lower than today’s rate.
A borrower who finances $20,000 in private student loans at today’s average fixed rate would pay around $240 per month and approximately $8,752 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Last week, rates on variable five-year student loans moved up, reaching 8.37% from 7.05% 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.
If you were to finance a $20,000 five-year loan at a variable interest rate of 8.37%, you’d pay approximately $409 on average per month. In total interest over the life of the loan, you’d pay around $4,545. Of course, since the interest rate is variable, it could fluctuate up or down from month to month.
Related: How To Get A Private Student Loan
How To Compare 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.
Remember, those with good or excellent credit typically get the best 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.
When shopping for a private student loan, you’ll generally need to apply directly through a non-federal lender. This includes banks, credit unions, nonprofit organizations, state agencies, colleges and online entities.
It’s important to note that you’ll need a qualified co-signer if you have limited credit history, as undergraduates often do.
Here’s what to consider when applying for a private student loan:
- Make sure you qualify.Private student loans are credit-based, and lenders typically require a credit score in the high 600s. This is why having a co-signer can be particularly beneficial.
- Apply directly through lenders.You can apply directly on the lender’s website, via mail or over the phone.
- Compare 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
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.