Private student loan interest rates rose this week for both 10-year fixed-rate and 5-year variable-rate loans. Ten-year loans edged up a slight 0.14 percentage points, while rates for 5-year terms saw a larger increase of nearly three percentage points. In addition to this week’s increases, rates for both loan terms are higher than they were this time last year.
Still, it’s worth noting that borrowers with good credit may find a lower rate with a private student loan than with some federal loans. For the 2022-23 academic school year, federal student loan rates will range from 4.99% to 7.54%. Private student loan rates for borrowers with good to excellent credit can be lower right now.
Because federal loans come with certain benefits, like access to income-driven repayment plans, you should always exhaust federal student loan options first before turning to private student loans to cover any funding gaps. Private lenders such as banks, credit unions and online lenders provide private student loans. You can use private loans to pay for education costs and living expenses, which might not be covered by your federal education loans.
Interest rates and terms on private student loans can vary depending on your financial situation, credit history and the lender you choose.
Private student loan rates (graduate and undergraduate)
Who sets federal and private interest rates?
Congress sets federal student loan interest rates each year. These fixed interest rates depend on the type of federal loan you take out, your dependency status and your year in school.
Private student loan interest rates can be fixed or variable and depend on your credit, repayment term and other factors. As a general rule, the better your credit score, the lower your interest rate is likely to be.
You can compare rates from multiple student loan lenders using Credible.
An interest rate is a percentage of the loan periodically tacked onto your balance – essentially the cost of borrowing money. Interest is one way lenders can make money from loans. Your monthly payment often pays interest first, with the rest going to the amount you initially borrowed (the principal).
Getting a low interest rate could help you save money over the life of the loan and pay off your debt faster.
Here’s the difference between a fixed and variable rate:
- With a fixed rate, your monthly payment amount will stay the same over the course of your loan term.
- With a variable rate, your payments might rise or fall based on changing interest rates.
Using a student loan interest calculator will help you estimate your monthly payments and the total amount you’ll owe over the life of your federal or private student loans.
Once you enter your information, you’ll be able to see what your estimated monthly payment will be, the total you’ll pay in interest over the life of the loan and the total amount you’ll pay back.