Finance
Private student loan interest rates fall for 5- and 10-year terms
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The latest private student loan interest rates from the Credible marketplace, updated weekly. (iStock)
During the week of Aug. 26, 2024, average private student loan rates decreased for borrowers with credit scores of 720 or higher who used the Credible marketplace to take out 5-year variable-rate loans and 10-year fixed-rate loans.
- 10-year fixed rate: 7.59%, down from 7.89% the week before, -0.30
- 5-year variable rate: 8.38%, down from 9.92% the week before, -1.54
Through Credible, you can compare private student loan rates from multiple lenders.
For 10-year fixed private student loans, interest rates fell by 0.30 percentage points, while 5-year variable student loan interest plummeted by 1.54 percentage points.
Borrowers with good credit may find a lower rate with a private student loan than with some federal loans. For the 2024-25 academic school year, federal student loan rates will range from 6.53% to 9.08%. Private student loan rates for borrowers with good-to-excellent credit can be lower right now.
Because federal loans come with certain benefits, like access to income-driven repayment plans, you should always exhaust federal student loan options first before turning to private student loans to cover any funding gaps. Private lenders such as banks, credit unions, and online lenders provide private student loans. You can use private loans to pay for education costs and living expenses, which might not be covered by your federal education loans.
Interest rates and terms on private student loans can vary depending on your financial situation, credit history, and the lender you choose.
Private student loan rates (graduate and undergraduate)
Who sets federal and private interest rates?
Congress sets federal student loan interest rates each year. These fixed interest rates depend on the type of federal loan you take out, your dependency status and your year in school.
Private student loan interest rates can be fixed or variable and depend on your credit, repayment term and other factors. As a general rule, the better your credit score, the lower your interest rate is likely to be.
You can compare rates from multiple student loan lenders using Credible.
How does student loan interest work?
An interest rate is a percentage of the loan periodically tacked onto your balance — essentially the cost of borrowing money. Interest is one way lenders can make money from loans. Your monthly payment often pays interest first, with the rest going to the amount you initially borrowed (the principal).
Getting a low interest rate could help you save money over the life of the loan and pay off your debt faster.
What is a fixed- vs. variable-rate loan?
Here’s the difference between a fixed and variable rate:
- With a fixed rate, your monthly payment amount will stay the same over the course of your loan term.
- With a variable rate, your payments might rise or fall based on changing interest rates.
Comparison shopping for private student loan rates is easy when you use Credible.
Calculate your savings
Using a student loan interest calculator will help you estimate your monthly payments and the total amount you’ll owe over the life of your federal or private student loans.
Once you enter your information, you’ll be able to see what your estimated monthly payment will be, the total you’ll pay in interest over the life of the loan and the total amount you’ll pay back.
About Credible
Credible is a multi-lender marketplace that empowers consumers to discover financial products that are the best fit for their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options – without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 7,700 positive Trustpilot reviews and a TrustScore of 4.8/5.
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They say you get better as you get older. This might just be true for 401(k) plans in 2025 for those striding into their golden years. Planning for retirement just got a significant boost for Americans aged 60 to 63, thanks to provisions in the SECURE Act 2.0.
Beginning in 2025, individuals in this age group will be eligible for something called a “super catch-up” contribution limit for employer-sponsored retirement plans, including 401(k)s. This exciting change, recently clarified by the IRS, provides a unique opportunity to accelerate your retirement savings during those crucial pre-retirement years.
The basics: Catch-up contributions
Catch-up contributions allow individuals aged 50 and older to save extra money for retirement beyond the standard contribution limits. For 2024, the catch-up contribution limit was $7,500, on top of the $22,500 annual contribution cap for 401(k)s and similar plans. These additional contributions are designed to help older workers close any retirement savings gaps they may have accumulated over the years.
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Introducing the super catch-up
Under the SECURE Act 2.0, individuals aged 60, 61, 62, and 63 can contribute even more to their retirement accounts starting in 2025. The new “super catch-up” limit will be the greater of $10,000 or 150% of the regular catch-up contribution limit for the given year, adjusted annually for inflation. At 64, you go to the regular catch-up.
401(k)s just got a little better for those who are aged 60-63, thanks to new catch-up provisions. (Reuters)
For example, if the regular catch-up contribution in 2025 remains at $7,500, the super catch-up limit would increase to $11,250 (150% of $7,500). If the $10,000 floor is adjusted for inflation, it could rise even higher, allowing individuals to add substantially more to their retirement savings.
Why is this important?
This enhancement comes at a pivotal time for many individuals. Those in their early 60s often find themselves at the peak of their earning potential, with more disposable income available for saving. At the same time, they are rapidly approaching retirement and may feel pressure to bolster their nest eggs. The super catch-up offers a golden opportunity to bridge any shortfalls and strengthen their financial security.
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Additionally, this provision aligns with the reality that many Americans are living longer. Increasing retirement savings can help ensure a more comfortable and secure retirement in the face of rising healthcare costs, inflation, and other financial challenges.
Key considerations
To take full advantage of the super catch-up, it’s essential to plan strategically:
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- Evaluate Your Budget: Ensure you have the financial flexibility to maximize contributions. Cutting unnecessary expenses or reallocating resources may be necessary.
- Consult a Financial Advisor: Professional guidance can help optimize your savings strategy, factoring in tax implications and long-term goals. One good place to start is at Exit Wealth to learn more about this technique.
- Understand Tax Implications: Contributions to traditional 401(k)s are tax-deferred, reducing your taxable income now but subject to taxes during retirement withdrawals. Consider how this fits into your overall tax strategy and whether the regular 401(k) or the Roth 401(k) make more sense for your situation.
- Stay Informed: Keep an eye on annual IRS updates regarding contribution limits and inflation adjustments.
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The super catch-up offers a golden opportunity to bridge any shortfalls and strengthen their financial security.
A new era of retirement savings
The super catch-up contribution is a testament to the growing focus on enhancing retirement readiness for Americans. By leveraging this opportunity, individuals aged 60 to 63 can significantly boost their retirement savings, potentially lower their overall tax liability, and provide greater peace of mind as they transition into their golden years.
If you’re approaching this age bracket, now is the time to review your retirement strategy and prepare to make the most of this exciting new provision. Retirement is a journey, and with the super catch-up, you can ensure yours is as secure and fulfilling as possible.
Ted Jenkin is president of Exit Stage Left Advisors and partner at Exit Wealth.
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