If you’ve ever considered refinancing your student loan, now is probably the right time to do it

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Patrick T. Fallon/Reuters

After hitting a post-recession peak last year, interest rates for student loan refinancing have fallen to a 12-month low.

That’s according to loan-comparison site Credible, which analyzed more than 11,000 refinancings and found the average borrower who refinanced to a 10-year fixed rate student loan in August 2019 saw rates around 4.70%. Compared to July 2018, that’s a 22% decrease in interest rates. Borrowers who refinanced to a five-year variable-rate loan saw interest rates of 4.03%.

According to Credible’s Matt Carter, student loan interest rates for graduate students in particular haven’t fallen much below 6% in the past few years.

For students who took out student loans when interest rates were high, refinancing could help save big on interest. Credible predicts that a borrower with the average $84,300 worth of graduate school debt and the average 6.36% interest rate could see a savings of $8,327 in interest over the life of the loan by switching to a 10-year fixed-rate loan.

There are a few options student loan borrowers have to take advantage of these rates. One option is to consolidate your student loans, or wrap all your loans into one loan with one monthly payment, and one (most likely lower) interest rate.

Another option is to refinance your loan into a variable-rate student loan, which will allow the interest rate to change over time. While you could refinance to today’s lower rate and stick with it for the next several years though a fixed-rate loan, a variable rate loan could be a good option given the way rates are expected to fall. Unlike a fixed-rate loan, a variable-rate loan’s interest rate changes with an index interest rate, such as the prime rate.

You might just find that today’s interest rates are much lower than the rates your student loans carry right now. And, if your credit has improved since college, you could see even better rates from refinancing. If you can shave even 1% off your student loan interest, it could make a big difference in the long run.

As with any financial decision, be sure to compare your options before choosing a lender to refinance your student loans. Loan-comparison sites like Credible can help you get quotes from multiple lenders before you commit, so you can find the best deal for you.

Compare student loan refinancing options with Credible »

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Editor’s note: This post has been updated to read that a borrower with the average $84,300 worth of graduate school debt and the average 6.36% interest rate could see a savings of $8,327 in interest over the life of the loan by switching to a 10-year fixed-rate loan, not a 10-year variable-rate loan.