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Fixed or Variable Student Loans – What to Choose?

Are you considering taking out private student loans? If so, you will come across a few options for student loan interest rates.

Many private student loan providers will offer students a choice between fixed or variable student loan interest rates. This is an important decision and can potentially save you thousands of dollars. Keep on reading to learn about the pros and cons of these interest rates so you can pick the best student loans options.

Also see: Scholarships360’s free scholarship search tool

Federal vs. private

If you’re only taking out federal loans, there’s no need to choose between variable and fixed rates. Both types of federal student loans–Direct Stafford Loans and Direct PLUS Loans–offer only fixed interest rates.

On the other hand, students who take out private student loans will have the option to take out either fixed or variable interest rates. Let’s get into what you should consider before making your choice:

Fixed student loans

A fixed student loan interest rate is one that is consistent for the entire duration of the student loan. If you are paying 4% now, you will be paying 4% for the entire lifecycle of the loan. 

Now, let’s get into the benefits and drawbacks of fixed student loans:

The biggest benefit of fixed interest rates is the predictability. You will know exactly how much you owe at all times. The biggest drawback of fixed interest rates is that they tend to be a bit higher than variable student loans (which we will get to next). Additionally, if a loan provider’s fixed interest rates go down in the future, you will still be locked into your current rate. 

Variable student loans

A variable student loan interest rate is an interest rate that can fluctuate according to the broader economic market. 

The benefit to this is that variable interest rates can offer lower interest rates than fixed interest rates, at least initially. The drawback is that the loans can fluctuate and may end up being higher than the fixed rates over the duration of the student loans. 

The biggest opportunity for student is if the pay off their variable student loan in a short timeframe (taking full advantage of the lower interest rate).

Learn more: Navigating different types of student loans

Are fixed interest rates or variable interest rates better?

Fixed interest rates are consistent and safer for students. For most students, fixed rate student loans are a safer option. This is because variable rate student loans can be unpredictable in how the interest rates fluctuate. 

Pros and cons

Pros for fixed student loans

  • Fixed loans are reliable and easy to plan your finances around; your payments and interest will not change throughout the loan’s lifetime
  • If interest rates fall significantly, you can look into refinancing your loans to take advantage of lower rates

Cons for fixed student loans

  • Interest rates are typically higher for fixed student loans
  • If interest rates fall, you won’t automatically be adjusted to their level

Pros for variable student loans

  • Your interest rates will typically lower than fixed student loan rates
  • If interest rates fall, you will receive lower rates without having to adjust your finances

Cons for variable student loans

  • Fluctuations in the market could lead to higher monthly payments, which could disrupt your budget if it is tight
  • You’re along for the ride, making yourself more vulnerable to market fluctuations

Are federal student loans fixed or variable?

Federal student loans are always fixed at a specific interest rate. For most students, federal student loans are the absolute best type of student loan and should be prioritized first. Generally, federal student loans offer more competitive interest rates, more repayment options, and other benefits such as loan forgiveness that other types of student loans don’t offer.

Keep reading: All about unsubsidized vs subsidized loans

Other factors to consider for making student loan choices

Fixed and variable interest rates are a huge deciding factor to consider when you decide on a student loan plan. But they are not the only one. You’ll want to look into a whole host of terms to find the ones that suit you best. For example, you’ll want to look into the possibility of income-driven repayment plans. With an income-driven repayment plan, you’ll be more insulated from defaulting on your loans. If your income drops, so will your monthly payments.

Depending on your program, you may even be eligible to use alternatives to student loans. For example, income sharing agreements allow students to go to college or a bootcamp or certificate program without taking out traditional loans. They will be required to pay a percentage of their paycheck in the future to repay their loan. This helps tie loan repayment even more firmly to income. In some cases, the cost will be higher. But, it insulates you from the possibility of defaulting even more.


  • Fixed student loans maintain a fixed interest rate for the entire duration of repayment. They are very reliable but often have higher interest rates than variable student loans
  • Variable student loans’ interest rates fluctuate during the repayment period. They are less reliable than fixed student loans but typically have a lower interest rate to start
  • All federal loans use a fixed interest rate