To refinance your student loan to a 10-year fixed-rate loan, average rates are 5.68% for the week ending October 4, down from 6.00% the week prior, while 5-year variable-rate loans saw rates at 3.38%, down from 4.61% the week before, according to data from personal finance company Credible of those who prequalified on their student loan marketplace. For those with credit scores of 720 and above, rates fell to 5.53% for 10-year fixed loans and 3.38% for 5-year variable loans. See the best rates you may qualify for here.
If you’re planning to refinance a private student loan because your credit score has improved or your finances have changed — and you’re able to get a more attractive interest rate or shorten your loan term — you’re likely to benefit from a refinance. But, refinancing student loans, particularly if you have a federal loan, isn’t always as cut and dry as it might seem.
Refinancing a student loan means taking out a new private loan to pay off an existing public loan. If you have a federal student loan and do that, you will lose any federal protections accompanying the federal loans. In other words, you would the forfeit the current student loan payment pause in effect through January 2023, government-issued loan forgiveness and income-based repayment options.
Therefore, experts recommend evaluating the pros and cons of a refi, especially if the borrower is using (or planning to use) any of those perks. And if the borrower is currently taking advantage of the federal student loan forbearance that has all federal student loan payments paused through January 2023, it makes sense to wait until that period has ended before refinancing.
Those with private student loans likely don’t have perks like those, so the decision is much more about how much money you can save and what better terms you can get. Be sure to shop around for the best rates and terms, pros say.