With student loan rates as low as 2%, here's how to refinance for better terms

Private student loan rates have fallen to the lowest point in all of 2021 in the past few weeks, according to Credible data, giving borrowers the chance to lock in a lower rate to repay their college debt.

The average refinancing rate for 10-year fixed-rate loans was 3.39% for well-qualified borrowers who used Credible's marketplace during the week of Oct. 18. Rates on 5-year variable-rate loans were even lower, averaging 2.48% during the same time period.

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While these average rates are already quite low, it may be possible to get an even better rate on student loan refinancing. Some lenders offer 5-year variable rates as low as about 2% or even less. 

But just because you can get a lower rate on your student loan debt doesn't mean it's always advisable. For example, refinancing your federal loans into a private loan would make you ineligible for government benefits like income-driven repayment plans (IDR), COVID-19 administrative forbearance and certain federal student loan forgiveness programs like Public Service Loan Forgiveness (PSLF).

However, private student loan borrowers don't have access to these programs, so you have nothing to lose by refinancing to a lower rate. Keep reading to learn how you can lock in the lowest possible student loan refinance rate for your unique situation. 

When you're ready to refinance your student loans, visit Credible to compare rates across multiple lenders at once.

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How to get a low student loan refinance rate

Refinancing your current loan to a new loan with a better rate can help you reduce your monthly payments, pay off your debt faster and save money on interest over the life of the loan. The lower rate you can get, the better your repayment options will be. Here are a few tips for getting a low student loan refinancing rate:

• Shop around with multiple student loan lenders
• Consider different repayment terms
• Enlist the help of a creditworthy cosigner

Consider each strategy in the sections below.

WHAT IS A STUDENT LOAN INCOME CONTINGENT REPAYMENT PLAN?

Shop around with multiple student loan lenders

While federal student loan rates are dependent on the year in which you borrowed them, private student loan rates vary based on a number of factors. Lenders determine eligibility and set interest rates by looking at the loan length and amount, as well as the borrower's credit history. 

That's why it's so important to shop around with multiple lenders to ensure you're getting the lowest rate possible for your situation. Many private student loan lenders let you prequalify with a soft credit pull to see your estimated interest rate without impacting your credit score. This way, you can choose the lender that offers you the best terms.

You can reach out to private student loan lenders individually, or you can get prequalified through multiple lenders at once on Credible's online marketplace. Browse interest rates from real private lenders in the rate table below.

HOW STUDENT LOANS AFFECT YOUR DEBT-TO-INCOME RATIO

Consider different repayment terms

Shorter repayment terms tend to come with lower interest rates, and vice versa. This can help you save money on interest over time since you're paying off the loan faster. However, a shorter repayment term will come with higher monthly payments, so this isn't recommended if you're trying to lower your monthly costs.

You may also be able to get a lower rate by choosing a variable-rate loan. While fixed-rate loans have the same interest rate over the life of the loan, variable interest rates may change over time. 

Since interest rates are low right now, variable rates are also low. But your lender may raise (or lower) your interest rate over time due to greater economic factors that are beyond your control. This is why many borrowers choose student loans with a fixed interest rate. But since private lenders can't charge fees like an origination fee or prepayment penalty, you would have nothing to lose by refinancing again if interest rates were to rise.

Use a student loan refinancing calculator to see how choosing a shorter term or variable-rate loan can impact the total interest paid over time.

FSA PREPARES FOR 'UNPRECEDENTED TASK' OF RESUMING FEDERAL STUDENT LOAN PAYMENTS

Enlist the help of a creditworthy cosigner

A good credit score can help you meet a lender's eligibility requirements and lock in the lowest possible interest rate on a number of financial products, including student loans. On the other hand, having bad credit can hold you back from getting a low student loan refinancing rate.

If you have bad or fair credit, consider getting the help of a cosigner with a good credit score. A cosigner has shared responsibility for repaying the loan, though, so only ask a cosigner for help if you're sure you can make the monthly payments.

You can learn more about private student loan refinancing and see your estimated interest rates for free on Credible.

DESPITE ONGOING FORGIVENESS TALKS, STUDENT LOAN BORROWERS SHOULD PREPARE FOR DEFERMENT TO END

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