Private student loan rates have increased: for 10-year fixed-rate loans, average rates reached 6.30% for the week ending June 19, while for 5-year variable-rate loans, rates were 4.43%. Of course, the 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.
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 such as banks and credit unions. While federal student loans have a fixed interest rate, private student loans can have a variable or fixed rate.
“I always recommend that students borrow federally 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 generally have more favorable repayment terms (such as income-driven repayment plans), loan forgiveness, and other benefits than private student loans.
That said, 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. Additionally, if you have great credit or have a co-signer with great credit, you’ll likely be able to take advantage of competitive interest rates, which can sometimes make private student loans more affordable than public loans. Here are four things to know before taking out a private student loan.