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Fixed vs. Variable Rate Student Loans

When searching for private student loans, you may find some lenders offer both a fixed and a variable rate option. What does this mean, and what are the pros and cons of each?

Fixed Interest Rate

A fixed rate loan is exactly as it sounds – the interest rate is fixed, or stays the same, for the entire life of your loan. Rates are currently low, so this could be a good time to choose a fixed option and lock it in.

Pros: You’ll know what your interest rate is and won’t have to worry about fluctuations down the road.

Cons: The tradeoff for knowing what your rate will be for the long haul is that it is often a higher rate to start with than a variable rate option.

Who should consider a fixed rate: In general, most borrowers will benefit from a fixed rate loan. But know that if interest rates decrease later, you’ll be stuck with the rate you locked in unless you refinance your loan(s).

Variable Interest Rate

When you select a variable rate loan, your interest rate will fluctuate over time based on the current index rate. (The Prime index provides the base rate for most loans.) Your lender adds a percentage to that base according to your credit score and history, and there is usually a limit or “ceiling rate” on how high your rate can go if the Prime index increases.

Pros: Variable rate options are typically lower than fixed rate at the start of your loan. Additionally, if the index decreases in the future, so will your interest rate.

Cons: There is risk involved; while your rate could go down, it could also increase, meaning you will pay more in interest over time.

Who should choose a variable rate: If you feel confident in your ability to continue to make payments regardless of a potentially higher interest rate, or you plan to pay your loans off quickly, you might want to consider a variable rate.

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*APR = Annual Percentage Rate

In order to apply for a loan, you must first pick an individual credit union from which you wish to borrow. You can apply for the loan without being a member of the credit union you select, but you will need to become a member of that credit union in order to receive a funded loan. Therefore, it's important that you select a credit union that you will be eligible to join. Credit union membership requirements can include where you live, work, or attend school. Results are based on membership criteria provided by individual credit unions and do not imply a guarantee regarding accuracy or eligibility to join the listed credit union(s).

Calculations are based on the lowest possible rate and available repayment terms per lender. Rate estimates are based on credit information entered by the user and will not impact your credit. During the application process, a hard credit inquiry will be performed to provide exact rate information. Repayment calculations assume immediate full repayment. View the full range of rates and terms by visiting your credit union's website using links listed for each credit union above.

Using the free student loan refinance calculator does not constitute an offer to receive a loan and will not solicit a loan offer. Any payments and savings will depend on the actual amounts for which you are approved, should you choose to apply. This calculator is provided for educational purposes only and should not be relied upon as financial advice. Always consult your credit union or financial advisor when making your decision.

IMPORTANT NOTICE for refinance borrowers: By refinancing federal student loans, you may lose certain borrower benefits from your original loans. These may include interest rate discounts, principal rebates, or some cancellation benefits that can significantly reduce the cost of repaying your loans. Please review this important disclosure for more information.

Your actual rate within the range stated will be disclosed upon approval. Student borrowers may apply with a creditworthy cosigner which may result in a better chance of approval and/or interest rate.