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Average interest rates on most refinanced student loans have increased since two weeks ago, according to Credible. Only five-year variable graduate rates have gone down. Five-year rates on undergraduate loans have jumped substantially, and rates on all 10-year loans are up.
This upcoming school year, federal student loan rates will increase by the most significant amount since the 2005-06 year. These new rates won’t directly impact private student loan rates, but private rates may go up as they don’t have to remain as low to compete with federal loan rates.
Laurel Taylor, CEO and founder of student debt fintech company FutureFuel.io, says that over the last two decades, it has been rare for rates to rise so significantly over such a short period of time. However, Taylor says borrowers shouldn’t be too worried about the jump in 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 repayment on a typical annual borrowing of $5,500 for an undergraduate,” Taylor says.
5-year variable student loan refinancing rates
Refinance rates on 5-year variable-rate undergraduate student loans have skyrocketed this past week, increasing by 1.40% from two weeks ago to hit 4.47%.
The refinance rates on 5-year variable graduate loans are actually down compared to two weeks ago. Currently, the average rate is 3.24%.
Rates on both loan types are up from one year ago.
10-year fixed student loan refinancing rates
Refinance rates on 10-year fixed student loans this past week have increased a little bit from two weeks ago. Undergraduate rates have risen by 21 basis points, while graduate rates have gone up by 37 basis points. Rates have gone up substantially from six months ago.
Student loan interest rates by credit score
impacts the rates you receive significantly. You’ll often get a better rate the higher your credit score. Below, we’ve listed the 10-year fixed student loan rates by credit score:
Why refinance a student loan?
You might qualify for a better rate when you refinance your student loans. You will also be able to change from a fixed-rate to a a variable-rate loan, or switch up your term length. By choosing a different term length, you might be able to distribute costs over an extended period for smaller monthly payments, though you’ll pay more in total interest.
How do you refinance a student loan?
To start refinancing, look at 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 refinance a student loan through the federal government.
Once you’ve picked 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.
5-year vs. 10-year loan
If you want a lower interest rate and are able to pay off your loan more quickly, a 5-year loan term could be an excellent 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 be more expensive 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.