March 19, 2024—10-Year Loan Rates Fall – Forbes Advisor – Technologist

Interest rates on refinanced student loans are slipping.

The average fixed interest rate on a 10-year refinance loan fell to 7.31% during the week of March 11. That’s for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace. The average interest rate on a five-year variable-rate loan decreased to 6.20% among the same population, according to Credible.com.

These rates are accurate as of March 11, 2024.

Related:  Best Student Loan Refinance Lenders

Fixed-Rate Loans

Last week, the average fixed rate on 10-year refinance loans declined by 0.15 percentage points to 7.31%. The week before, the average stood at 7.46%.

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 6.98%, 0.33 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 $235 per month and approximately $8,251 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.

Variable-Rate Loans

Average variable rates on five-year refinance loans moved down last week by 0.39%, falling to 6.20%.

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.

Refinancing an existing $20,000 loan to a five-year loan at 6.20% interest would yield a monthly payment of approximately $389. A borrower would pay $3,311 in total interest over the life of the loan. But the rate in this example is variable, and it could move up or down each month.

Related: Should You Refinance Student Loans?

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 to get the lowest interest rates, you’ll need a good or excellent credit score.

If your credit is poor or your income isn’t high enough to qualify, you have a couple of options. You can wait to refinance until you’ve built credit or you have enough income. Or, you can ask a relative or friend to be a co-signer. Just make sure that the co-signer knows that if you can’t make student loan payments, they’ll be responsible. The loan will also appear on their credit report.

How To Get the Best Student Loan Refinance Rates

The best student loan refinance rates typically go to borrowers with strong credit. To get the best rate, take some time to improve your credit before you apply. Paying down debts, reducing your credit utilization ratio and disputing any errors on your credit report can boost your credit.

Another option is applying for student loan refinance with a co-signer. If you can add a creditworthy co-signer to your application, you might qualify for a better interest rate. However, remember that your co-signer will share responsibility for the loan.

Finally, compare offers from multiple lenders. Each lender sets its own rates and terms, so shopping around can help you find a student loan refinance offer with the best rate.

Refinancing Student Loans: What Else to Consider

There are a few things to keep in mind when refinancing a federal student loan into a private student loan. To begin, you’ll lose access to some benefits that federal student loans offer. For instance, you’ll no longer have access to income-driven repayment plans or deferment and forbearance options.

If you’re thinking about refinancing federal student loans, first make sure you likely won’t need to use any of these programs. This may be the case if your income is stable and you plan to quickly pay off a refinance loan. You always have the option to refinance only your private loans, or only a portion of your federal loans. Since federal loans’ fixed interest rates are typically quite low, you may also decide refinancing wouldn’t lead to substantial savings.