For 10-year fixed-rate loans, average rates hit 7.18% for the week ending July 18, while 5-year floating-rate loans saw rates fall to 3.61%, according to the latest data available from Credible for the week ending July 18. Of course, the exact rates you’ll pay depend on factors such as the lender you choose, the type of loan (fixed or variable rate), and your credit score. Check here for the lowest private student loan rates you could qualify for.
Private Student Loans vs Federal Student Loans
There are two main types of student loans: federal loans, which are issued and funded by the federal government, and private loans, which are issued by private financial institutions like banks. Federal student loans have fixed interest rates and private student loans can have a variable or fixed rate. “I always recommend that students take federal loans first before looking to private student loans,” Mark Kantrowitz, student loan expert and founder of PrivateStudentsLoans.guru, told MarketWatch Picks recently. This is because federal loans typically have more favorable repayment terms (such as income-driven repayment plans), loan forgiveness, and other perks.
However, if you’ve maxed out your federal student loans and still have debt, private student loans can help fill in the gaps in your funding. Keep in mind that if you have great credit or have a co-signer with great credit, you can probably take advantage of competitive interest rates, which can sometimes make private student loans more affordable than public loans. Keep in mind that they often don’t come with as many benefits as federal loans.
To get the lowest rate on a private student loan, you’ll want to have a high credit score and/or co-sign with one, choose a shorter loan term if you can afford it, and get quotes from multiple lenders. And here are four things to know before taking out a private student loan.