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Interest rates on refinanced student loans are moving up.
For borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace during the week of March 18, the average fixed interest rate on a 10-year refinance loan was 7.34%. On a five-year variable-rate loan, the rate was 7.12%, according to Credible.com.
These rates are accurate as of March 18, 2024.
Related: Best Student Loan Refinance Lenders
Fixed-Rate Loans
Last week, the average fixed rate on a 10-year refinance loan jumped by 0.03 percentage points to 7.34%. The average stood at 7.31% the week before.
Fixed interest rates won’t fluctuate throughout a borrower’s loan term. That means borrowers refinancing now will lock in a rate higher than one they would have received this time last year. At this time last year, the average fixed rate on a 10-year refinance loan was 7.12%, 0.22 percentage points lower than today’s rate.
Let’s say you refinanced $20,000 in student loans at today’s average fixed rate. You’d pay around $236 per month and approximately $8,288 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Variable-Rate Loans
Last week, rates on variable five-year refinance student loans moved up, reaching 7.12% from 6.20% the week before.
In contrast to fixed rates, variable interest rates fluctuate over the course of a loan term according to market conditions and the financial index they’re tied to. Many refinance lenders recalculate rates monthly for borrowers with variable-rate loans, but they typically limit how high the rate can go—to 18%, for instance.
If you were to refinance an existing $20,000 loan to a five-year loan at a variable interest rate of 7.12%, you’d pay approximately $397 on average per month. In total interest over the life of the loan, you’d pay around $3,829. Of course, since the interest rate is variable, it could fluctuate up or down from month to month.
Related: Should You Refinance Student Loans?
Fixed-Rate Loans vs. Variable-Rate Loans
For most borrowers, the biggest motivation to refinance student loans is to reduce the amount of interest they’ll pay. That means choosing the lowest possible interest rate is a top priority.
You may find that variable-rate loans start out lower than fixed-rate loans. But because they’re variable, they have the potential to rise in the future.
Fortunately, you can reduce your risk by paying off your new refinance loan quickly, or at least as quickly as possible. Start by picking a loan term that’s short but with a payment that’s manageable. Then, pay extra whenever you can. This can hedge your risk against potential rate increases.
When considering your options, compare rates across multiple student loan refinancing lenders to ensure you’re not missing out on possible savings. Explore whether you qualify for additional interest rate discounts, potentially by choosing automatic payments or having an existing financial account with a lender.
How To Get the Best Student Loan Refinance Rates
One of the primary benefits of refinancing student loans is reducing your interest rate. Lowering your rate may lower your monthly payments and save you money. Here are some ways to get the best student loan refinance rates:
- Work on your credit before you apply. The best student loan refinance rates usually go to borrowers with excellent credit. If you don’t immediately need a loan, improve your credit before applying to qualify for the best rates.
- Add a creditworthy co-signer to your application. Applying with a co-signer can also help you score a better rate, especially if that co-signer has strong financial credentials.
- Compare offers from multiple lenders. Shop around to find the best rates, since one lender might offer better rates than another. Many lenders let you prequalify for student loan refinancing online, which lets you check your rates with no obligation or impact on your credit score.
When To Refinance Student Loans
Lenders generally require you to complete your degree before refinancing. Though it’s possible to find a lender without this requirement, in most cases, you’ll want to wait to refinance until after you’ve graduated.
Keep in mind that you’ll need a good or excellent credit score to get the lowest interest rates.
If you don’t yet have strong enough credit or income to qualify, you can either wait and refinance later or ask a friend or relative to be a co-signer. The co-signer you choose should be aware that they’ll be responsible for making student loan payments if you no longer can and that the loan will appear on their credit report.
