As more and more jobs throughout the country require you to possess a college degree, student loans are on the rise. These helpful loans allow those attending college to more easily pay for their tuition in small monthly increments instead of being stuck with a large bill all at once. Before you take out a student loan, it’s best to do some research on them so you can ensure that you’re getting the best loan for your budget.
What’s the Typical Student Loan Term?
Student loans are known to have repayment terms of between 5 and 30 years. Most standard repayment programs for federal loans last for about ten years. In the case of private student loans, repayment terms average between 5 and 15 years. The repayment terms that you are offered will highly depend on a number of factors. These include the principal amount, monthly payment, interest rate, credit score, and so forth.
It’s essential to note that the shorter repayment term you agree to, the larger your monthly payment will be. Additionally, the shorter the repayment term, the lower your interest rate will be.
What is the Average Interest Rate?
According to Lantern by SoFi, “Among all borrowers, 5.8% is the average student loan interest rate, according to recent data from Educationdata.org.” It’s crucial to note that interest rates are going to greatly vary depending on a number of factors, such as your term length and credit score.
In most cases, you’ll find that federal student loans have a lower interest rate than private student loans. It’s been estimated that about 90 percent of all student loan debt is comprised of federal student loans. Federal loan rates will range from 3.73 to 6.28%. On the other hand, fixed private student loan rates range from 2.94 to 12.99%. Variable private student loan rates range from .94 to 11.98%.
Can Refinancing Lower Your Interest Rate?
Just like other loans, a student loan can be refinanced as well. There are a variety of reasons you may choose to refinance your student loans with Lantern. The most common is taking advantage of a lower interest rate. When you first got your student loan, interest rates may have been higher, or your credit may have been lower. Either way, refinancing can help to decrease the amount of money you pay each month towards interest on your loan.
Refinancing is also a great option for those who are looking to lower the payment amount of their student loan. While getting a lower interest rate than you have can help to slightly reduce your monthly payments, there’s more that you can do. Refinancing your existing student loan for a longer repayment period can allow you to significantly reduce your monthly payments. However, you’ll end up paying your loan for more years than your current loan.
Student loans can be a worthy investment when you pay attention to how you finance them. It’s crucial that you understand all the different interest rates and repayment terms that are available so that you can utilize student loans that fit your budget and lifestyle.