Private Student Loan Rates: June 21, 2022—Loan Rates Rise - Forbes

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Published: Jun 27, 2022, 10:29am
The average interest rate on 10-year fixed-rate private student loans increased last week. For many borrowers, that means rates continue to be low enough to make private student loans a decent option, especially if you have good credit.
For borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace from June 20 to June 24, the average fixed interest rate on a 10-year private student loan was 6.71%. On a five-year variable-rate loan, the rate was 4.31%, according to Credible.com.
Related: Best Private Student Loans
Last week, the average fixed rate on a 10-year loan jumped by 0.41% to 6.71%. The average stood at 6.30% the week prior.
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 5.70%, 1.01% lower than today’s rate.
A borrower who finances $20,000 in private student loans at today’s average fixed rate would pay around $229 per month and approximately $7,509 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Last week, the average rate on a variable five-year student loan fell to 4.31% on average from 4.43%.
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 4.31%, you’d pay approximately $371 on average per month. In total interest over the life of the loan, you’d pay around $2,268. 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
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.
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. For example, the interest rate for federal undergraduate student loans is 3.73% for the 2021-22 school year.
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.
If you’re an undergraduate with limited credit history, you’ll generally need to apply with a co-signer who can meet the lender’s borrowing requirements.
Here’s what to consider when applying for a private student loan:
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.
If you have good or excellent credit, you have a better chance at landing the best interest 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.
Brianna McGurran is the Loans Analyst for Forbes Advisor. Most recently, she was a staff writer and spokesperson at NerdWallet, where she wrote “Ask Brianna,” a financial advice column syndicated by the Associated Press. As spokesperson, she also contributed her expertise to outlets including The New York Times, ABC World News Tonight and the Today Show.

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