For 10-year fixed rate loans, the average student loan refinance rate was 4.93%, up slightly from the previous week, although average 5-year variable rate loan rates were down slightly. fell from the previous week to 3.68%, according to Credible’s latest rates released this week. Remember that variable rates can go up and note that those with higher credit scores and better finances may get lower rates, while those with lower scores may not get away with it. as well. You can see the lowest student loan refinance rates you could qualify for here.
When refinancing a student loan, the borrower effectively takes out a new loan to pay off the existing loan, often to take advantage of better rates and/or terms. But don’t let the promise of lower rates fool you, refinancing student loans isn’t always a good idea, especially for those with federal loans.
Should you refinance your student loans?
If you have a federal student loan, there are generally few instances where refinancing actually makes sense. By refinancing a federal student loan, a borrower converts their public loan into a private loan. This means depriving the borrower of federal protections such as income-based repayment tools and certain loan forgiveness rights, which is why refinancing a federal student loan at this time – when the payment tied to the pandemic and the suspension of interest are in effect – can be risky.
Even though lower interest rates mean you’ll save money each month, if there’s any chance you’ll take advantage of the protections provided by federal student loans, you should weigh the pros and cons of refinancing. Indeed, once you have converted a federal loan into a private loan, you can never change it again.
Private student borrowers do not have to deal with these issues because there is no risk of losing federal protections. Instead, if you’ve increased your credit score or there’s been a positive change in your finances that could lower your rate or make your terms more attractive, refinancing can save you some money. significant. When it comes to adjusting the terms of your loan, experts say that while your monthly payments will likely increase if you shorten your loan term, you will pay less money during the term of the loan because your repayment period will end. sooner and you’ll earn less interest.
If you’re wondering if refinancing is right for you, Marketwatch Picks has put together a guide with 5 questions you should ask yourself during the process. To see how you can save thousands of dollars when refinancing student loans, this Marketwatch Picks guide can help you get started.
*Prices correct at time of publication.