SAN FRANCISCO–Student loan borrowers have been refinancing and locking in what were described as the “lowest fixed rates ever offered by lenders” according to one company.
Credible said it has seen a surge in those holding student loans refinancing as interest rates have continued to fall. According to an analysis of a representative sample of 60,000 rate requests submitted to the Credible marketplace, during August, the company reported:
- Rates on 10-year fixed-rate loans averaged a record low of 4.31%, down 29% from a May 2018 peak of 6.09%
- Rates on 5-year variable-rate loans averaged 3.17%, up from a previous record low of 2.82% seen in June, but down 37% from a 2018 high of 5.05%
Private Student Loan Borrowers Drive Trend
The company noted that to provide relief from the economic impacts of the coronavirus pandemic, interest and payments on federal student loans has been suspended through Dec. 31.
“With rates on federal loans at 0% through the end of the year, there’s little incentive to refinance federal student loans,” the company sated. “But many borrowers with private student loans are taking advantage of low rates environment to refinance their education debt.
If the interest waiver on federal student loans is allowed to expire at the end of 2020, Credible said it will again make sense to look into refinancing federal loans if they have high interest rates, such as PLUS loans.
“But refinancing federal loans with a private lender means giving up access to federal borrower benefits, such as access to income-driven repayment plans with potential loan forgiveness after 10, 20, or 25 years of payments,” the company said.
Although private student lenders may provide deferment or forbearance to borrowers experiencing economic hardship, private student loan forgiveness is typically offered only when borrowers become disabled or die.”