This week’s student loan refinancing rates: October 25, 2022 | 5-year undergraduate rates drop by more than half

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Average interest rates on five-year variable undergraduate refinanced student loans fell by more than half from last week, according to Credible Student Loans. The rates on 10-year loans are pretty much flat, and the rates on five-year variable graduate loans are up. 

While five-year undergraduate student loan rates are down, the last year has seen a major increase on rates across the board. Federal student loan rates for 2022-23 are rising by the most in almost two decades. These new rates won’t have a direct impact on private student loan rates, but private rates may rise as they don’t have to remain as low to be in the same range as federal loan rates.

5-year variable student loan refinancing rates

If you wanted to refinance a 5-year undergraduate loan this past week, you would have received a much better rate than two weeks ago. Rates dropped by more 4 percentage points, settling at 3.77%. This significantly decreases the loan costs for these borrowers. 

On the flip side, graduate rates are up by about 63 basis points from two weeks ago, and are also higher than they were six months ago.

This past week3.77%3.55%
2 weeks ago7.89%2.92%
6 months ago3.94%3.40%
1 year ago2.79%2.75%

10-year fixed student loan refinancing rates

While rates on 5-year undergraduate loans swung significantly, rates on 10-year loans held relatively steady, not changing much over the past week. 

This past week6.02%5.47%
2 weeks ago5.96%5.59%
6 months ago5.04%4.60%
1 year ago3.71%3.34%

Student loan interest rates by credit score

Your interest rate will usually improve with a better credit score. The table below shows the 10-year fixed student loan rates by credit score:

 Below 680680-719720-779780+Average Rate
This past week6.18%6.45%5.92%5.06%5.87%
2 weeks ago6.50%6.40%5.87%5.18%5.84%

Frequently asked questions

Why should I refinance my student loan?

Refinance your student loans may get you a better rate. You can also switch from a  fixed-rate to a a variable-rate loan, or change your term length. A different term length may enable you to spread out costs over an extended period for smaller monthly payments. However, you’ll pay more in total interest.  

Does refinancing my student loans affect my credit score?

In the short term, yes. Lenders will conduct a hard inquiry to check your credit history when you apply for a new loan. That will lower your credit score temporarily.

Additionally, when you refinance, your original loan is closed and a new one is opened. As part of your credit score is based on your payment history, your credit score may take a hit as your work to establish a new track record of reliable payments. 

Is it difficult to get approved for student loan refinancing?

Your credit history is the biggest factor in your refinancing approval chances. If you have a poor credit score, it will be harder for you to get a new loan. But you may be able to enlist a cosigner to boost your likelihood of approval. 

Read the original article on Business Insider