Student Loan Refinance Rates: March 29, 2022—Loan Rates Start To Increase
March 29, 2022 – Lending Rates Begin To Rise – Forbes Advisor

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The average interest rate on refinanced student loans rose last week. For many borrowers, that means rates continue to be low enough to make refinancing a winning option.

The average fixed interest rate on a 10-year refinance loan was 4.02% from March 21 to March 25. This is for borrowers with a credit score of 720 or higher who have prequalified in Credible.com’s student loan marketplace. The average interest rate on a five-year variable-rate loan was 3.12% among the same population, according to Credible.com.

Related: Best Student Loan Refinance Lenders

Fixed rate loans

Last week, the average fixed rate on a 10-year refinance loan increased from 0.22% to 4.02%. The average was 3.80% the previous week.

Because fixed interest rates stay the same for the duration of a borrower’s loan, it’s possible to lock in a rate that’s significantly lower than what you would have received this time last year. The average fixed rate on a 10-year refinance loan this time last year was 3.76%, 0.26% lower than the current rate.

If you were to refinance $20,000 in student loans at today’s average fixed rate, you’d pay about $203 per month and about $4,322 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.

Variable rate loans

Average floating rates on five-year refinance loans fell 0.10% last week to 3.12%.

Unlike fixed rates, variable interest rates fluctuate over the life of a loan depending on market conditions and the index to which they are linked. Many refinance lenders recalculate rates monthly for borrowers with variable rate loans, but they usually limit the height of the rate, to 18%, for example.

Let’s say you refinanced an existing $20,000 loan to a five-year loan with a variable interest rate of 3.12%. You would pay around $360 on average per month. You would pay approximately $1,626 in total interest over the life of the loan. Keep in mind that since interest is variable, it can fluctuate up or down from month to month.

Related: Should You Refinance Student Loans?

When to Refinance Student Loans

Most lenders require borrowers to graduate before refinancing, but not all do, so in most cases, wait to refinance until you graduate. You will also need a good or excellent credit score and a stable income in order to access the lowest interest rates.

If your credit is low or your income is not high enough to qualify, you have several options. You can wait to refinance until you have accumulated credit or have sufficient income. Or, you can get a co-signer. Just make sure the co-signer knows that if you can’t repay your student loan, they will be responsible. The loan will show up on their credit report.

It is important to make sure that you will save enough money when refinancing. While many borrowers with strong credit ratings could benefit from refinancing at today’s interest rates, those with weaker credit will not benefit from the lowest rates available.

Do the math to see if refinancing will benefit your situation. Shop around for rates, then calculate what you could save.

Refinancing of federal loans into private loans

A crucial caveat to mention is that refinancing federal student loans into a private loan means you will lose many of the benefits of federal loans, like income-driven repayment plans and generous deferment and forbearance options. .

You may not need these programs if you have a stable income and plan to pay off your loan quickly. But be sure you won’t need these programs if you plan to refinance federal student loans.

If you need the benefits of these programs, you can refinance only your private loans or only a portion of your federal loans.

Fixed Rate Loans vs Variable Rate Loans

For most borrowers, the primary motivation for refinancing student loans is to reduce the amount of interest they will pay. This means that choosing the lowest possible interest rate is a top priority.

Variable loan rates may initially be lower than fixed rate loan rates. Of course, because they are variable, they are subject to increases in interest rates. You can limit the risk of interest rate increases with variable rate loans by paying off your loan as quickly as possible. Still, if you like the reliability of a fixed payment, fixed rate loans might be a better choice.

When considering your options, compare rates from multiple student loan refinance lenders to ensure you don’t miss out on possible savings. Determine if you qualify for additional interest rate discounts, possibly by choosing automatic payments or having an existing financial account with a lender.

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