Last week, the average interest rate on 10-year fixed-rate private student loans inched up. Overall, rates remain fairly low, making private student loans a worthwhile option for borrowers looking to make up a gap in college funding.
From February 24 to March 1, the average fixed interest rate on a 10-year private student loan was 8.59% 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 7.18% among the same population, according to Credible.com.
These rates are accurate as of February 24, 2025.
Related: Best Private Student Loans
Fixed-Rate Loans
The average fixed rate on 10-year loans last week increased by 1.05% to 8.59%. The week prior, the average stood at 7.54%.
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 7.05%, 1.54% lower than today’s rate.
A borrower who finances $20,000 in private student loans at today’s average fixed rate would pay around $249 per month and approximately $9,872 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.
Variable-Rate Loans
Average variable rates on five-year loans moved down last week by 2.63%, falling to 7.18%.
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 7.18%. You’d pay about $398 on average per month. You’d pay approximately $3,863 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
What Are the Advantages of Private Student Loans?
There are several advantages to private student loans, including:
- Competitive interest rates.
Many private lenders offer competitive interest rates, especially if you have excellent credit or a creditworthy co-signer.
- Low or no fees.
The best private student loans don’t charge an origination fee, unlike federal Direct loans, which charge a loan disbursement fee. Some private lenders don’t even charge fees for late payments.
- High loan amounts.
Depending on the lender, you may be able to borrow up to your school’s total cost of attendance minus any previously awarded financial aid.
- Grace period.
Some private lenders let you defer payments while you’re in school and for a few months after graduation. Some grace periods last up to nine months after graduation.
- Easy online application process.
It’s easy to apply for a private student loan online in just a few steps. Some lenders also let you check your rates through prequalification, allowing you to compare offers without dinging your credit score.
- Bonus perks, depending on the lender.
Some lenders offer additional borrower benefits, such as financial counseling, career services, deferment and forbearance or cash-back rewards for graduating or getting good grades.
- Availability to international students.
International students are not eligible for federal financial aid from the U.S. Department of Education, but they may qualify for a private student loan to pay for school.
What Is Required To Get a Student Loan?
Specific student loan requirements will vary by lender, but you typically need to be a U.S. citizen or qualifying non-citizen who meets the average age requirement in your state. Make sure you’re enrolled in or planning to enroll in an eligible program at a qualifying institution.
Moreover, you must meet the lender’s credit, income and debt-to-income ratio requirements. Most lenders look for a good credit score of 670 or higher, though specific requirements vary.
Some lenders require or prefer that you apply with a co-signer. A co-signer is a parent or a trusted adult who agrees to repay the loan if you miss payments. Some lenders allow a co-signer release after a certain period of on-time payments.
Shopping for Private Student Loans
First, take a look at the loan’s overall cost. Consider both interest rate and fees. Also, look at the type of help each lender offers if you’re not able to afford your payments.
Keep in mind that the best rates are only available to those with good or excellent credit.
Experts generally recommend that you borrow no more than what you’ll earn in your first year out of college. While some lenders cap the amount of money you can borrow each year, others don’t. When comparing loans, figure out how the loan will be disbursed and what costs it covers.
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