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Last week, the average interest rate on 10-year fixed-rate private student loans jumped up. Despite the rise, rates still remain relatively low, providing borrowers with an opportunity to fill in financial gaps in higher education costs.
According to Credible.com, from December 4 to December 9, the average fixed interest rate on a 10-year private student loan was 8.04%. It was 8.46% 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 December 4, 2023.
Related: Best Private Student Loans
Fixed-rate Loans
Last week, the average fixed rate on a 10-year loan jumped by 0.55% to 8.04%. The average stood at 7.49% 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 7.07%, 0.97% 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 $243 per month and approximately $9,169 in total interest over 10 years, according to London Reviews’s student loan calculator.
Variable-rate Loans
Average variable rates on five-year loans moved up last week, from 8.10% on average to 8.46%.
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 8.46% would yield a monthly payment of approximately $410. A borrower would pay $4,597 in total interest over the life of the loan. Keep in mind that since the interest rate is variable, it could change monthly.
Related: How To Get A Private Student 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.
How To Get a Private Student Loan
Private student loans may be a decent option if you reach the annual borrowing limits for federal student loans or if you’re otherwise ineligible for them. You should consider a federal student loan as your first option, as interest rates are generally lower and you’ll enjoy more liberal repayment and forgiveness options than with a private loan.
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.
Comparing 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.
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.
