The latest student loan refinance rates – and is it a good time to refi?

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Student loan refinance interest rates rose slightly last week, but remain relatively low and close to levels seen at the same time last year, according to data for the week ending January 24 from Credible, which looked at borrowers with credit scores of 720 and above in their market. The rates for the 10-year fixed rate loans were 3.56%, while the interest rates for the 5-year variable loans were 3.41%. Of course, the rate you’ll actually qualify for depends on a variety of factors, including your credit score, level of debt, and income. See the lowest rates you can qualify for here, and here are the average student loan interest rates, broken down by credit score.

10-year fixed rate

5-year variable rate

640 to 679

4.77%

4.59%

680 to 719

4.33%

4.02%

720 to 779

3.78%

3.20%

780 or more

3.44%

2.67%

Who should and who shouldn’t refinance their student loans?

A big question to ask yourself when considering a refi is whether it will save you money — either by lowering your interest rate, shortening the repayment term, or both, says expert Mark Kantrowitz. in student loans and author of How to Appeal for More College Financial Aide. Those who have had an increase in income, improvements in their credit rating, or who have paid off large debts may be able to secure much better rates than they currently have. This calculator can help you determine how much you would save by refinancing. Note that while a shorter repayment term may result in higher monthly payments, it can easily save you thousands in interest. Moreover, “the shorter the repayment period, the lower the interest rate. This is because lenders factor in the likelihood that interest rates will start to rise over time,” Kantrowitz explains.

The other thing you need to consider is the type of loans you have, Kantrowitz says. Those with federal loans should proceed with caution when refinancing into a private student loan. First, you are likely currently benefiting from the federal government’s interest-free student loan payment moratorium, which extends through May 2022.

And even after that period is over, it may still be a good idea to skip refinancing, because it would “permanently strip federal loans of their potentially useful safeguards, such as access to income-driven repayment plans, deferment and forbearance programs as well as current and potential future loans. forgiveness programs,” says Andrew Pentis, Certified Student Loan Counselor and Debt Expert at StudentLoanHero. Rebecca Safier, Certified Student Loan Counselor and Debt Expert at Student Loan Hero, adds, “Make sure you’ve thought through everything you’re going to give up before you finalize the deal. The federal government offers you protections that your new private lender will not.

Also see: 5 questions to ask yourself before refinancing a student loan.

Should I opt for a fixed rate or variable rate loan?

Although the lowest rates to start with are often on variable rate loans today, fixed rate loans can be a safer choice in the long run. If you refinance your loan at a variable interest rate, your monthly payment may go up or down – and while it could go down, which would mean a smaller monthly payment, it could also go up and exceed what you would pay with a fixed rate. -interest rate. Since fixed rate loans often have very low rates right now, those expecting to hold onto their loan for a while will likely benefit from opting for a fixed rate loan.

How much can I save by refinancing my student loans?

The amount one can save by refinancing student loans varies, but it’s not uncommon for borrowers to save thousands of dollars over the life of their loan. According to data from New America, the average student borrower has about $39,350 in outstanding loans and an average interest of 5.8%. If a borrower in this scenario had a 10-year loan but refinanced to the same term at 3.8%, they would save about $4,600 over the life of the loan. If the same person reduced the term of their loan to 5 years, it would bring them about $8,600 in savings. This free calculator can help you figure out how much you can save.

One mistake Kantrowitz says people make when trying to assess their savings is that they mistakenly believe that cutting their interest rate in half will cut their monthly payment in half. “This actually reduces the payment by only 10% to 20%, depending on the repayment term, because most of the payment goes to principal, not interest,” Kantrowitz explains.

Other things to consider if you’re considering refinancing your student loans

Although the cost of refinancing a mortgage loan can be high, refinancing student loans generally does not come with a high cost in terms of fees. But you’ll still want the lowest interest rate you can get: Work to raise your credit score as much as possible to get the best rates. To secure a higher credit score, be sure to pay your bills on time, catch up on overdue accounts, pay off revolving account balances like credit cards, and limit how often you apply for new loans. .

If you have a low credit score, some lenders allow you to apply with a co-signer. “Adding a creditworthy co-signer to your application can help you qualify and get better rates, but your co-signer becomes just as responsible for the loan,” says Safier.

*Prices correct at time of publication.

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