5-year variable-rate loans

Rising tuition costs
Gr8t Shots / Shutterstock

A five-year variable-rate refinance is an option that can help you wipe out your student debt balance more quickly. Rates on those loans are averaging 2.61%, according to the latest data from the Credible marketplace.

Rates are up from an average 2.55% a week earlier, but they're much lower versus a year ago, when the typical rate was 3.30%.

And today's rates are still pretty close to the record low of 2.48% reached in mid-October.

The average specifically pertains to borrowers with credit scores of at least 720. Lower interest rates are possible for those with exceptional scores, of 780 or higher; Credible's website indicates that today's refi rates can be as low as 1.74%.

At the other end of the spectrum, people with so-so scores (between 640 and 679) are usually scoring higher rates around 4.59%.

Be aware that variable rates can fluctuate based on market conditions, meaning you could wind up with a higher rate before the loan's five-year term is up.

10-year fixed-rate loans

Red icon of interest on the background of coins
1599686sv / Shutterstock

For borrowers eager to lock in a good deal over a longer repayment period, 10-year fixed-rate refinance loans are now averaging 3.42%.

Rates have gone down from the average 3.44% during the previous survey week, and are closing in on late September's all-time low of 3.36%.

Again, people with excellent credit qualify for better-than-average rates. But those with unimpressive scores might have to accept a steeper rate, typically 4.77%.

Though fixed-rate loans generally come with higher borrowing costs than the variable-rate variety, your interest rate is guaranteed to hold steady for the loan term.

Plus, a 10-year loan will offer more affordable monthly payments than a five-year, but you'll likely have to spend a lot more money on interest by the time your debt is paid off.

How to bag the lowest refi rate you can

Man and woman reviewing student loan papers, looking to refinance to a lower rate.
fizkes / Shutterstock

If you have a federal student loan, be certain you understand what you may give up by refinancing.

Switching from a government loan to a refi — offered by a bank or other private lender — would make you ineligible for the government relief that's been extended to borrowers during the pandemic, including frozen payments and interest.

But if you’re OK with that tradeoff, or if you already have a private student loan, refinancing to a cheaper rate could slash your monthly payments.

To land the lowest possible refi rate:

  • Spruce up your credit score. Lenders will review your credit to determine whether you're a good risk. Today it's easy to check your credit score for free, then take steps to shine it up so you'll look more impressive to a lender.

  • Set up auto-pay. Often, you can knock a little bit off your interest rate by agreeing to make automatic payments. That provides some assurance to the lender that you'll pay on time each month.

  • Compare your options. Plenty of lenders offer student loan refinances, and the only way to find the best deal is by shopping around. Different lenders can weigh your application differently, so get multiple rate quotes and size them up side by side before you click "Apply."

About the Author

Doug Whiteman

Doug Whiteman

Editor-in-Chief

Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

You May Also Like

Looking For Passive Income? There's One Option Right Below Your Feet

One company’s innovative approach makes farmland investing easier and more accessible.

3 Ways to Reduce Student Loan Debt Before Biden's Payments Freeze Ends

Here's how to reduce your debt before loan repayment and interest resume in the new year.

3 Ways to Earn Big Returns Without the Shaky Stock Market

Don't limit yourself to the stock market. These alternatives can trounce the S&P 500.

Do Big Stores Save You the Most? We Price-Check Our Shopping List

With one 30-second trick, we found $460 in savings beyond Walmart and Amazon.