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During the week of October 10, 2022, average private student loan rates increased significantly for borrowers with credit scores of 720 or higher, compared to those who took 10-year fixed-rate loans and 5-year variable-rate loans. Reliable market access.
- 10-year fixed rate: 7.39%, up from 6.37% the week before, +1.02
- 5-year variable rate: 8.87%, up from 7.97% the week before, +0.90
Private student loan interest rates increased this week for both 10-year fixed rate loans and 5-year variable rate loans. Five-year loans increased by 0.9 percentage points, while rates for 10-year terms saw a bigger increase of 1.02 percentage points. Apart from this week’s rate hike, the rates for both loan terms are higher this time than last year.
Still, it’s worth noting that borrowers with good credit can get lower rates with private student loans than with some federal loans. For the 2022-23 academic school year, federal student loan rates will range from 4.99% to 7.54%. Private student loan rates can be low right now for borrowers with good to excellent credit.
When it comes to federal loans, they come with some big benefits, such as access to income-driven repayment plans. You should always exhaust federal student loan options before turning to private student loans to cover any funding gaps. should do. Private Lenders: Banks, credit unions, and online lenders work to provide private student loans. You can use private loans to pay for education costs and living expenses that may not be covered by your federal education loans.
The interest rates and terms on private student loans can vary depending on your financial situation, credit history, and the lender you choose.
Take a look at trusted partner lenders’ rates for borrowers who used Trusted Marketplace to select a lender during the week of October 10.
Who sets the federal and private interest rates?
Federal student loan interest rates are set by Congress each year. These fixed interest rates depend on the type of federal loan you take out, your dependency status, as well as your years in school.
The interest rates charged on private student loans can be fixed or even variable and depend on your credit, the time taken for repayment and other factors. As a general rule, the better your credit score, the lower your interest rate.
How does student loan interest work?
The interest rate is a percentage of the loan taken on your balance over a period of time — essentially the cost of borrowing money. Interest is one way lenders can make money from a loan. Your monthly payment often pays interest first, with the rest going into the amount you initially borrowed (principal).
Getting a lower interest rate can help you save money and pay off your loan faster throughout the life of the loan.
What is Fixed vs Variable Rate Loan?
Here is the difference between a fixed and variable rate:
With a fixed rate, your monthly payment amount will remain the same throughout your loan tenure.
With a variable rate, your payment may rise or fall based on changes in interest rates
Calculate your savings
Using a student loan interest calculator will help you estimate your monthly payments and the total amount over the life of your federal or private student loans.
Once you’ve entered your information, you’ll be able to see what your estimated monthly payment will be, how much you’ll pay in interest over the term of the loan, and the total amount you’ll pay back.