Significant Drop in the Interest Rate of Private Student Loan

When you cross the maximum borrowing limit to take a federal student loan, private student loans come to the rescue. In the latest student loan news, there has been a surge in the interest rate for private student loans. We know that federal student loans have the upper hand and are widely preferred by students for their flexibility and easy repayment options. 

However, if you have touched down the limit for federal student loans, then you can opt for private student loans to fulfill your dreams. Furthermore, as per Credible, a student loan provider marketplace, borrowers with a credit score of 720 or higher were paying an interest rate of 8.13% on a 10-year fixed-rate loan. This interest rate was applicable from 16 to 21 October 2023, whereas on a 5-year variable rate loan, an interest of 11.31% was applicable. 

But, to student's relief, there has been a significant slip in the interest rates, attracting more borrowers. This considerable drop of 0.54% and 2% in the interest rates for both fixed and variable-rate loans may result in a rise in the number of borrowers. Let’s take a look at both private student loan interest rates to understand it better. 

1. Fixed-rate loans - 

With the latest development in the interest rate for the fixed rate on 10-year loans, borrowers will now have to pay less interest rate as compared to the rate from a few weeks ago. In the mid-week of October 2023, borrowers were liable to pay 8.67% of interest for the fixed rate on 10-year loans. However, in the last week of October, the interest rate decreased by 0.54%, which is 8.13%. The number is still high as compared to 2022 when the number stood at 8.08%. 

2. Variable-rate loans -

If we take a look at the variable-rate loans, the interest rate has seen a surge here as well,, from 11.31% to 9.20%, seeing a drop of more than 2%. The substantial decline will definitely affect the monthly payment amount positively. 

The private student loan interest rate is highly dependent on the credit score of the borrowers. In order to avail the benefit of lower interest rates, one is expected to have a reputed credit score. We are looking forward to seeing how this sudden drop in the interest rate of the private student loan will affect the decision-making power of the borrowers.