Q: Why is the interest rate on my private student loan higher this year than last year? I have the exact same private student loan, exact same student loan lender, and exact same cosigner on my private student loan?
A: There could be a few reasons that would cause the interest rate on a private student loan to increase from the previous year. However, without knowing the specifics for an individual’s situation, it can be difficult to give an exact reason for the interest rate increase. Since the interest rate each borrower will qualify at is based upon the borrowers and/or cosigners credit, a change in the borrowers and/or cosigners credit score could likely cause the borrower to not qualify at the same interest rate as they did the previous year.
The same private student loan interest rate is not guaranteed to the borrower every year they apply. Each year the borrower applies for a private student loan, the lender will take a new look at the borrower and/or their cosigners credit profile. If the borrower or the cosigner have had a change in their credit profile/score (caused by an increase in debt, missed payments to other lenders, etc…), the lender will likely not be able to approve the private student loan at the same interest rate as the previous year, and in some instances they may not even be able to approve the loan at all. The only way for a borrower to know for certain what caused the increase in the interest rate is to contact the lender. Also, borrowers should always exhaust their federal student loan options before utilizing a private student loan. Federal student loans are based on a borrowers financial need, and not on a borrowers credit score.