student loans

6 sneaky ways students land in loan trouble

My payments are getting more expensive
My payments are getting more expensive © Fesus Robert/

That's a common problem borrowers with variable-rate loans encounter, says Robinson. While all federal student loans and some private loans come with a fixed interest rate, meaning you'll pay the same interest rate for the life of the loan as long as you stay in the same repayment plan, some private loans have variable interest rates that fluctuate over time.

Several private lenders, including Wells Fargo and Discover, determine interest rates on variable student loans by taking a fixed "margin rate," which is largely based on your credit profile, and adding it to the "prime rate," which is the rate at which banks will lend money to their most creditworthy customers.

"The variable rate is going to be pretty inexpensive right now. However, you can't count on that for the life of a student loan," says Robinson. "With a variable rate, even though it sounds good upfront, that might not be the case when you finish school and are paying 10 years later."

The prime rate is currently low at 3.25 percent; however, just 13 years ago, it was nearly triple the rate it is now.


Show Bankrate's community sharing policy
          Connect with us
  • Apply for a Private Student Loan to pay for your education
  • Find Rates

Discover new ways to cut costs and save more every day. Reduce your spending, not life’s pleasures. Delivered weekly.

Partner Center

Connect with us