Best answer
Fixed
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Should you choose a fixed or variable rate student loan?
If you choose a fixed rate, you are betting that rates will increase. Fixed rate student loans means that the interest does not change throughout the term of the loan. Variable rate student loans mean the interest will fluctuate based on the rate index or other underlying benchmark.
What is a variable-rate loan?
Variable interest rates are only available on private student loans and refinancing loans. With variable-rate loans, the interest rate on your loan can change鈥攑erhaps monthly. They often start with lower interest rates than fixed-rate loans, but the interest rate can increase based on the index the lender uses.
Why does loanfinder only include variable interest rate programs?
The LoanFinder (our tool that helps you compare student loans) only includes variable interest rate programs. We do this because it鈥檚 a bit less confusing for borrowers when they are first evaluating their options. A private student loan with a fixed rate will always have a higher interest rate than a variable rate loan from the same lender.
What are the risks of a variable rate loan?
But risk is involved, as the variable rate has the potential to rise during the term of your loan. The potential advantage of a variable rate loan is that it may help you save on interest. However, this savings can happen only if the interest rate market holds steady or declines during your loan term.