The average interest rate on 10-year fixed-rate private student loans slipped 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.

From June 10 to June 15, the average fixed interest rate on a 10-year private student loan was 7.76% for borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan marketplace. On a five-year variable-rate loan, the average interest rate was 10.85% among the same population, according to Credible.com.

These rates are accurate as of June 10, 2024.

Related:  Best Private Student Loans

Fixed-rate Loans

Last week, the average fixed rate on 10-year loans decreased by 0.09% to 7.76%. The week prior, the average stood at 7.85%.

Borrowers currently in the market for a private student loan will 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 7.16%, 0.60% lower than today’s rate.

If you were to finance $20,000 in student loans at today’s average fixed rate, you’d pay around $240 per month and approximately $8,815 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.

Variable-rate Loans

Last week, rates on variable five-year student loans moved up, reaching 10.85% from 8.89% the week prior.

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.

Let’s say you financed a $20,000 five-year loan with a variable interest rate of 10.85%. You’d pay about $433 on average per month. You’d pay approximately $6,001 in total interest over the life of the loan. Keep in mind that since the interest is variable, it could fluctuate up or down from month to month.

Related: How To Get A Private Student Loan

Getting a Private Student Loan

Before you look to a private student loan, consider a federal student loan as your first option. The interest rates on federal student loans are generally lower. Federal student loans also tend to have far more generous repayment and forgiveness options. Yet, if you’ve reached the borrowing limits for federal student loans or if you’re ineligible for them, private student loans can be a good solution.

To get a private student loan, you’ll generally need to apply directly through a non-federal lender. You can find private student loans through banks, credit unions and online entities. Nonprofit organizations, state agencies and colleges also offer loans.

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.

When applying for a private student loan, take into consideration the following:

• Your qualifications. Private student loans are credit-based. Lenders typically require a credit score in the higher 600s. This is where having a co-signer can be particularly beneficial.
• Where to apply. You can apply directly on the lender’s website, via mail or over the phone.
• Your options. Look at what each lender offers and compare the interest rate, term, future monthly payment, origination fee and late fee. Also, check to see if the lender offers a co-signer release so that the co-borrower can eventually come off of the loan.

Shopping for Private Student Loans

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.

Keep in mind that the best rates are only available to those with good or excellent credit.

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.

How Lenders Determine Your Rate

The rate you receive depends on whether you’re getting a fixed or variable loan. Rates, in part, are based on your creditworthiness—those with higher credit scores often get the lowest rates. But your rate is based on other factors as well. Credit history, income and even the degree you’re working on and your career can play a part.