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Fixed vs. variable student loan rates: Which is best for you?

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The type of interest rate you get on a student loan is just as important as the rate itself. Fixed interest rates stay the same throughout the loan term, which means you’ll have predictable monthly payments. Variable interest rates, on the other hand, can fluctuate in response to market changes. Your monthly payments could rise and fall accordingly.

The right choice between fixed and variable student loans depends on the type of borrower you are, your future income and what you can reasonably afford to repay. Here’s the breakdown of variable versus fixed interest rates for student loans.

What is the difference between fixed and variable student loans?

The main difference between fixed and variable student loans is whether the interest rate can change. However, there are some other areas your rate can affect, including your budget, your student loan payment and how your payment relates to your future income.

Fixed-rate student loans
Variable-rate student loans
Interest rate will never change
Monthly payments are consistent
Know exactly how much interest you’ll pay
Lower starting rates
Benefit from market changes (in some cases)
Lower monthly payments if interest rates are low
Higher starting rates
No benefit if interest rates drop
Rate can rise over time
Monthly payment can change

Fixed-rate student loans

Fixed rates remain constant for the duration of the loan term, which means that your monthly student loan payments will be predictable as you pay off your debt. The only way to change a fixed interest rate is by refinancing the loan.

While fixed rates are typically higher than the lowest advertised variable rates, they provide stability because the payment won’t change. When you begin the repayment phase for your student loans, you’ll know exactly how much you’ll pay every month and how much interest you’ll pay overall.

Variable-rate student loans

Variable interest rates are tied to market conditions, so your student loan payment could increase or decrease based on an adjustment in your interest rate. Lenders typically tie the loan’s variable rate to a benchmark rate, like the prime rate or the Libor index.

While you might start off with a lower payment than you would with a fixed-rate loan, there’s a chance that your interest rate — and monthly payment — could rise later on.

When to choose a fixed-rate student loan

Fixed interest rates are good for borrowers who don’t have a lot of wiggle room to account for an adjusting interest rate. All new federal student loans have fixed interest rates, and fixed rates are typically an option with private lenders.

Here are some scenarios where choosing a student loan with a fixed rate can make sense:

  • Your income is low and you need a student loan payment that will never go up.
  • You’re in a low-interest-rate environment and want to lock in a low rate.
  • You’re choosing a long repayment period and will likely encounter market shifts.

When to choose a variable-rate student loan

Variable-rate student loans are a good option if you qualify for the lowest rates available. Private student loans tend to offer variable interest rate options, but federal student loans don’t come with variable rates.

Scenarios where it makes sense to get a variable rate loan include:

  • You plan to pay off your student loan early, before rates have a chance to rise too much.
  • You have some wiggle room in your budget in case of rising interest rates.
  • You have good or excellent credit so you can qualify for the best rates and terms.

Final considerations: Is it better to have a fixed or variable loan?

If you’re thinking about taking out or refinancing student loan debt, the type of interest rate can be a determining factor in where you borrow from. While federal student loans are the best choice for most borrowers, given the borrower protections included with the loan, they offer only fixed interest rates. Private student loans, on the other hand, tend to offer both fixed and variable interest rates, giving you the option to take advantage of the one that best fits your finances and repayment plan.

If a lender offers variable-rate student loans, ask how often the rate can change. Some lenders adjust variable rates monthly, while others adjust the rate every quarter. The lender might also cap the rate increase to keep your costs under control. These details can help you figure out whether your budget can accommodate a variable-rate loan.

You might decide to get a fixed-rate student loan if you prefer predictability over upfront savings. This is generally a good option for recent college graduates who are still figuring out their budgets. If you want to take advantage of lower student loan rates later on, you might be able to refinance your student loans.

No matter which type of student loan you decide to get, make sure to get quotes from a few student loan lenders. That will help ensure that you are paying the least amount of interest possible.

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Written by
Kim Porter
Contributing writer
Kim Porter is a former contributor to Bankrate, a personal finance expert who loves talking budgets, credit cards and student loans. Porter writes for publications such as U.S. News & World Report, Credit Karma and When she's not writing or reading, you can usually find her planning a trip or training for her next race.
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Reviewed by
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