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Variable vs. Fixed Rate Student Loans: How to Choose

Understanding how fixed- and variable-rate student loans work can help you choose the best type of loan for your financial situation.

Emily Guy Birken Emily Guy Birken Edited by Jared Hughes Updated June 13, 2022

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

The interest rate on a loan is a percentage of the loan principal charged by the lender as part of your overall loan cost — essentially, it’s a fee you pay to borrow money.

When you take out a student loan, you might have a choice between:

  • A fixed interest rate, which will stay the same throughout the life of the loan
  • A variable interest rate, which can fluctuate depending on the market conditions

Here’s how to decide between a fixed or variable student loan interest rate:

  • Fixed vs. variable student loan interest rates
  • Fixed-rate student loan benefits and drawbacks
  • Variable-rate student loan benefits and drawbacks
  • Student loan refinancing: Better to get a fixed or variable rate?
  • How do student loan interest rates work?
  • How to get the lowest student loan rate
  • How to calculate student loan interest
  • How rate indexes affect student loans
  • Example of a fixed vs. variable interest rate

Fixed vs. variable student loan interest rates

If you’re comparing a fixed versus variable interest rate on a student loan, it’s important to consider your overall repayment strategy to choose the most optimal rate for your needs. Here are a few important points about both rate types to keep in mind:

Fixed interest rate Variable interest rate
Interest rateFixed for lifeMay go up or down
Monthly paymentDoesn't change
(except in IDR)
Can go up or down with rate
Loan typeFederal or private student loansPrivate student loans
ProsSame rate and monthly payment for life of the loan
  • Lower rate at outset
  • May provide lower monthly payment and total cost
ConsHigher rate than a variable-rate loan with same repayment term
  • Unpredictable monthly payment and total repayment cost
  • Rate can rise dramatically

No matter if you choose a fixed- or variable-rate student loan, it’s important to shop around and compare as many lenders as possible. This way, you can find the right loan for your needs.

Credible makes this easy — you can compare your prequalified rates (both fixed and variable) from multiple lenders in two minutes.

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Learn More: How Do Federal and Private Student Loans Work?

Interest rates for federal and private student loans

Here are the interest rates you can generally expect for federal and private student loans:

Interest ratesRate type
Federal Direct Subsidized Loans4.99%*Fixed only
Federal Direct Unsubsidized Loans
  • Undergrad: 4.99%*
  • Graduate or professional: 6.54%*
Fixed only
Federal Direct PLUS Loans7.54*Fixed only
Private student loans
  • Fixed rates from (APR): 3.65%+
  • Variable rates from (APR): 4.49%+
(with Credible partner lenders)
Fixed or variable
*Federal student loan rates for the 2022-23 academic year.

Check Out: How to Pay for College With No Money Saved

Fixed-rate student loan benefits and drawbacks

Before you apply for a fixed-rate student loan, you’ll want to consider the benefits and drawbacks.

Benefits of a fixed-rate student loan

In some cases, a fixed-rate student loan could be the right option for your finances. Here are a few reasons why you might choose a fixed interest rate:

  • Predictable monthly payment: With a fixed interest rate, your monthly payment will stay the same throughout the life of the loan.
  • Fixed repayment cost: Because a fixed interest rate won’t ever change, you’ll know exactly how much the loan will cost you.
  • Could be less expensive for longer repayment periods: If you expect to repay your loan over several years, a fixed interest rate will likely be less expensive than a variable interest rate that could fluctuate over time.

Learn More: Best Parent Student Loans: Choosing Private or PLUS Loans

Drawbacks of a fixed-rate student loan

While the predictability of fixed-rate student loans is appealing for many borrowers, there are also some potential drawbacks to keep in mind:

  • Higher initial interest rate: Fixed interest rates generally start off higher compared to variable rates for the same repayment term, which means your payments will be more.
  • Rate won’t ever drop: Unlike a variable rate that could shift over time, a fixed rate will stay the same throughout the life of the loan. This means a fixed interest rate won’t drop if market rates decrease.
  • Higher loan cost for shorter repayment terms: If you plan to pay off your loan quickly, you could end up paying more on a fixed-rate loan compared to a variable-rate loan.

Check Out: Grad PLUS Loans: PLUS Loans for Graduate Students

Variable-rate student loan benefits and drawbacks

Variable-rate student loans also come with benefits and drawbacks to consider.

Benefits of a variable-rate student loan

A variable-rate student loan might be the best choice for your needs in some situations. Here are a few benefits of variable rates to consider:

  • Lower initial interest rate: Variable rates generally start off lower than fixed interest rates, which could be especially helpful if you plan to pay off your loan quickly before the rate can change too much.
  • Lower initial payments: Because variable rates are usually lower than fixed rates to start, your initial payments will start off lower in comparison. This might be appealing if you expect your income to rise over time.
  • Potential for interest rate drops: Depending on market conditions, a variable rate might drop in the future. This also means your monthly payments will be reduced.

Learn More: Independent vs. Dependent Student: Which Are You?

Drawbacks of a variable-rate student loan

Although a variable rate might be appealing in some cases, here are a few drawbacks to think about:

  • Interest rate could change: A variable rate can rise or fall along with market conditions. This could make it difficult to estimate your overall repayment cost.
  • Unpredictable payments: Any changes in your variable rate will also mean shifts in your monthly payments.
  • Potentially more expensive overall: Depending on how quickly you pay off your student loan, you might find yourself paying much more over time with a variable rate compared to a fixed rate.
Keep in mind: Depending on the lender, a variable-rate student loan could come with an interest rate cap, which is the highest variable rate allowed by the lender. Your rate will never increase past this amount.

This can help keep your interest costs lower as well as offer some peace of mind. However, you might still end up paying more in interest with a capped variable-rate loan than you would with a fixed-rate loan — especially if you can’t pay off your loan before your rate has a chance to change.

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Student loan refinancing: Better to get a fixed or variable rate?

Student loan refinancing is the process of paying off your old loans with a new private student loan, leaving you with just one loan and payment to manage.

If you choose to refinance your student loans, you’ll also typically have a choice between a fixed or variable rate — this means you can switch the kind of rate you currently have.

Keep in mind: Your financial needs as a graduate will likely have changed from when you were first attending school — so it’s important to carefully reconsider which kind of rate will be best for your situation.

Pros and cons of a fixed-rate refinanced loan

While a fixed-rate refinanced loan could be a good choice for some borrowers, it isn’t right for everyone. Here are some pros and cons to keep in mind as you consider your options:

ProsCons
  • Rate won't ever change
  • Predictable monthly payments
  • Could save you money on interest if you need a longer payment term
  • Fixed rates can start off higher than variable rates
  • The only way to change your rate is to refinance again
  • Might cost you more in interest if you plan to pay off your loan quickly

Pros and cons of a variable-rate refinanced loan

Like fixed-rate loans, variable-rate loans also come with their own pros and cons when it comes to refinancing, such as:

ProsCons
  • Variable rates can be lower to start than fixed rates
  • Your payments might start off lower
  • You could save money on interest if you plan to pay off your loan quickly
  • Your rate might rise
  • Your payments could change, which might be hard to budget for
  • You might end up paying more in interest over time compared to a fixed-rate loan

Check Out: How to Use Student Loans for College Living Expenses

How do student loan interest rates work?

Your interest rate is the main factor that will determine how much you’ll pay for a student loan over time. Here’s how student loan interest rates work for federal and private student loans:

Federal student loan interest rates

All federal student loans have fixed rates that will stay the same throughout the life of the loan. Federal rates are set by Congress and are updated each year. The rate you get on a federal student loan will depend on the type of loan you choose as well as your year in school.

Tip: If you need to borrow money to pay for college, it’s usually a good idea to start with federal student loans. This is mainly because these loans come with federal benefits and protections — such as access to income-driven repayment plans and student loan forgiveness programs.

Additionally, most federal student loans don’t require a cosigner or a credit check.

Here are the rates you can expect for the 2022-23 academic year, as well as how rates have changed over time:

  • Direct Subsidized Loans: 4.99%
  • Direct Unsubsidized Loans (for undergraduate students): 4.99%
  • Direct Unsubsidized Loans (for graduate and professional students): 6.45%
  • Direct PLUS Loans (for graduate students and parents): 7.45%

Learn More: Federal vs. Private Student Loans: 5 Differences

Private student loan interest rates

The interest rates on private student loans are set by individual lenders based on market conditions. Many private lenders offer both fixed- and variable-rate student loans.

Keep in mind: The rates you’re offered on private student loans will mainly depend on your credit. You typically need good to excellent credit to qualify for a private student loan and to get the most favorable rates. In general, the better your credit score, the lower your rate will be.

Some lenders offer private student loans for bad credit. But these loans usually come with higher interest rates compared to good credit loans.

Here are the rates you can expect on the private student loans offered by Credible’s partner lenders, as well as how variable rates have shifted on private loans over time:

  • Fixed rates from (APR): 3.65%+
  • Variable rates from (APR): 4.49%+

Check Out: Private Student Loans & COVID-19: What You Need to Know

How to get the lowest student loan rate

Here are a few strategies that could help you get a good interest rate on a private student loan:

  • Have good credit. Your credit score is one of the main factors that will determine the rates you’re offered. You’ll generally need good to excellent credit to qualify for the lowest interest rates — a good credit score is usually considered to be 700 or higher.
  • Apply with a cosigner. If you have less-than-perfect credit, applying with a cosigner could make it easier to get approved for a private student loan. Having a cosigner with good credit might also get you a lower interest rate than you’d get on your own.
  • Choose a shorter repayment term. Many lenders offer lower rates for shorter repayment terms. It’s usually a good idea to pick the shortest term you can afford to keep your interest costs as low as possible.
  • Compare lender options. It’s important to research and compare your options from as many lenders as possible. This way, you can find the right loan with the most favorable rate for your needs.

If you’re ready to start shopping for a private student loan, Credible can help. You can compare your prequalified rates from our partner lenders in the table below in two minutes.

LenderFixed Rates From (APR)
Variable Rates From (APR)Loan amountsLoan terms (years)


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.62%+10 5.74%+10 $2,001 to $400,0007 to 20
  • Fixed APR: 4.62%+10
  • Variable APR: 5.74%+10
  • Min. credit score: Does not disclose
  • Loan amount: $2,001 to $400,000
  • Loan terms (years): 5, 7, 10, 12, 15, 20
  • Repayment options: Full deferral, fixed/flat repayment, interest only, academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: 0.25% to 1.00% automatic payment discount, 1% cash back graduation reward
  • Eligibility: Must be a U.S. citizen or permanent resident or DACA student enrolled at least half-time in a degree-seeking program
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 12 on-time principal and interest payments
  • Loan servicer: Launch Servicing, LLC


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.99%+1 4.89%+ $1,000 to $350,000 (depending on degree)5, 10, 15
  • Fixed APR: 4.99%+1
  • Variable APR: 4.89%+
  • Min. credit score: 720
  • Loan amount: $1,000 to $350,000
  • Loan terms (years): 5, 10, 15
  • Loan types: Any private or federal student loan
  • Repayment options: Full deferral, full monthly payment, interest only, immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay, loyalty
  • Eligibility: Available in all 50 states (international students can apply with a creditworthy U.S. citizen or permanent resident cosigner)
  • Customer service: Email, phone, chat
  • Soft credit check: Yes
  • Cosigner release: After 36 months
  • Loan servicer: Firstmark Services


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.49%+2,3
4.49%+2,3 $1,000 up to 100% of the school-certified cost of attendance5, 8, 10, 15
  • Fixed APR: 4.49%+2,3
  • Variable APR: 4.49%+2,3
  • Min. credit score: Does not disclose
  • Loan amount: $1,000 up to cost of attendance
  • Loan terms (years): 5, 8, 10, 15, 20
  • Repayment options: Full deferral, full monthly payment, fixed/flat repayment, interest only, immediate repayment, academic deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay
  • Eligibility: Must be a U.S. citizen or permanent resident and be making satisfactory academic progress.
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 24 months
  • Loan servicer: College Ave Servicing LLC

custom choice

Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
3.65%+ 5.46%+ $1,000 to $99,999 annually
($180,000 aggregate limit)
7, 10, 15
  • Fixed APR: 3.65%+
  • Variable APR: 5.46%+
  • Min. credit score: Does not disclose
  • Loan amount: $1,000 to $99,999 annually ($180,000 aggregate limit)
  • Loan terms (years): 7, 10, 15
  • Repayment options: Full deferral, immediate repayment, interest-only repayment, flat/full repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available to borrowers in all 50 states. Must be a U.S. citizen or permanent resident.
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Cosigner release: After 36 months
  • Loan servicer: American Education Services
  • Min. income: Does not disclose

edvestinu student loan refinance

Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.52%+7 6.89%+7 $1,000 to $200,0007, 10, 15
  • Fixed APR: 7.52%+7
  • Variable APR: 6.89%+7
  • Min. credit score: 750
  • Loan amount: $1,000 to $200,000
  • Loan terms (years): 7, 10, 15
  • Repayment options: Full deferral, full monthly payment, interest only, immediate repayment, academic deferment, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay
  • Eligibility: Must be a U.S. citizen or permanent resident and have a minimum income of $30,000.
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 36 months
  • Loan servicer: Granite State Management & Resources (GSM&R)


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.37%+8 5.86%+8 $1,001 up to 100% of school certified cost of attendance5, 10, 15
  • Fixed APR: 4.37%+8
  • Variable APR: 5.86%+8
  • Min. credit score: 670
  • Loan amount: $1,001 up to cost of attendance
  • Loan terms (years): 5, 10, 15
  • Repayment options: Full deferral, full monthly payment, interest only, immediate repayment, academic deferment, forbearance
  • Fees: Late fee
  • Discounts: Autopay, reward for on-time graduation
  • Eligibility: Must be an Indiana resident or a U.S. citizen attending an eligible Indiana school
  • Customer service: Email, phone, chat
  • Soft credit check: Yes
  • Cosigner release: After 48 months
  • Loan servicer: American Education Services


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.89%+ N/A$1,500 up to school’s certified cost of attendance less aid15
  • Fixed APR: 4.89%+
  • Variable APR: N/A
  • Min. credit score: 670
  • Loan amount: $1,500 up to cost of attendance less aid
  • Loan terms (years): 10, 15
  • Repayment options: Full deferral, interest only, immediate repayment, academic deferral, forbearance
  • Fees: None
  • Discounts: None
  • Eligibility: Must be a U.S. citizen or permanent resident and be making satisfactory academic progress.
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 48 months
  • Loan servicer: American Education Services (AES)


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.509 - 14.83%9 5.37%9 - 15.709 $1,000 up to 100% of school-certified cost of attendance10 to 20
  • Fixed APR: 4.509 - 14.83%9
  • Variable APR: 5.37%9 - 15.709
  • Min. credit score: Does not disclose
  • Loan amount: $1,000 up to 100% of school-certified cost of attendance
  • Loan terms (years): 10 to 209
  • Repayment options: Full deferral, fixed/flat repayment, interest only, academic deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee, non-sufficient funds (NSF) fee
  • Discounts: Autopay
  • Eligibility: Must be a U.S. citizen or permanent resident. Also available to non-U.S. citizen students (including DACA students) attending a school located in the U.S. who apply with a qualifying cosigner.
  • Customer service: Phone, chat
  • Soft credit check: Yes
  • Cosigner release: Borrowers can apply after graduation, 12 consecutive on-time principal and interest payments, and meeting certain credit requirements.
  • Loan servicer: Sallie Mae
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How to calculate student loan interest

Before you take out a student loan, it’s important to consider how much that loan will cost you over time. This way, you can be prepared for any added expenses.

You can see what your estimated monthly payment will be along with your total interest costs by using our student loan calculator below.

Enter your loan information to calculate how much you could pay

? Enter the total amount borrowed $
? Enter your annual interest rate %
or
? Enter the amount of time you have to repay your loan years
Total Payment $
Total Interest $
Monthly Payment $

With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan, assuming you're making full payments while in school.

How rate indexes affect student loans

Variable rate loans, including private student loans with variable interest, use an index to determine your interest rate. The index is based on current market conditions. For example, when inflation is low, an index will generally be low — but when inflation increases, the index also goes up.

Private lenders will give you a variable interest rate based on that index, plus a margin that’s generally determined based on your credit. If you have a good credit score and history, the margin will be lower, so your variable interest rate will only be a little higher than the index rate.

Here’s how your private lender calculates your variable interest rate:

Your variable rate = Index (which fluctuates) + Margin (which remains the same)

For example: If your variable interest rate is equal to the SOFR index + a margin of 3%, your monthly rate could be is as follows:

0.78% (current SOFR rate) + 3% (your margin) = 3.78%

What are LIBOR and SOFR?

A lender might use several indexes to determine your variable interest rate. For a long time, the London Interbank Offered Rate (LIBOR), which is based out of the United Kingdom, was the most common index used for determining variable interest rates. However, this index is scheduled to be discontinued as of June 2023.

Private student loan lenders will generally be required to pick a replacement index that’s comparable to LIBOR. Lenders will likely choose the Secured Overnight Financing Rate (SOFR), as this is the index recommended by the Federal Reserve’s Alternative Reference Rates Committee. SOFR charts the average rate of interest that U.S. banking institutions borrow money from other institutions overnight, using U.S. Treasury bonds as collateral.

In other words, the SOFR rate determines the cost of borrowing for banks, and it helps banks decide how much interest to charge borrowers.

Example of a fixed vs. variable interest rate

When you’re comparing student loan products, it can be tough to determine whether a fixed interest rate or a variable interest rate will be cheaper. A fixed interest rate will typically be higher than a variable rate when you first take out the loan. But depending on how the index performs, you may end up paying more in interest with a variable rate over time.

Let’s look at an example:

Say you take out a private student loan for $20,000 with a fixed interest rate of 6.42% and a fixed monthly payment of $226 for 10 years.

However, if you choose a variable rate for the $20,000 loan, your initial APR would be 4.15% and you’d have a monthly payment of $204 over the same 10-year repayment period. (The 4.15% APR is based on the current SOFR rate of 0.78 plus a margin of 3.37%.)

Let’s see how the variable rate might change over time:

Fixed interest rate
Variable interest rate
Year 1
(SOFR at 0.78)
RateMarginIndexVariable rate
Year 2
(SOFR ↑ 2.0%)
6.42%3.37%2.78%6.15%
Year 3
(SOFR ↑ 1.0%)
6.42%3.37%3.78%7.15%
Year 4
(SOFR ↓ 0.5%)
6.42%3.37%3.28%6.65%
Year 5
(SOFR ↑ 0.25)
6.42%3.37%3.53%6.90%
Year 6
(SOFR ↓ 1.0%)
6.42%3.37%2.53%5.90%
Year 7
(SOFR ↓ 0.75%)
6.42%3.37%1.78%5.15%
Year 8
(SOFR ↑ 2.0%)
6.42%3.37%3.78%7.15%
Year 9
(SOFR ↓ 1.5%)
6.42%3.37%2.28%5.65%
Year 10
(SOFR ↓ 0.25%)
6.42%3.37%2.03%5.40%

Though your variable rate in this example would be lower than your fixed rate for the majority of your repayment term, there are four years during which your variable rate (and therefore your monthly payment and total interest paid) would be higher than your fixed rate.

It might be a good idea to pay more than your monthly repayment amount with a variable rate loan when the variable rate is low. Paying more than the minimum allows your extra payment to go toward the principal, which will reduce your repayment time and the amount you’ll pay in interest over the life of the loan.

Enter your loan information to calculate how much you could pay

? Enter the total amount borrowed $
? Enter your annual interest rate %
or
? Enter the amount of time you have to repay your loan years
Total Payment $
Total Interest $
Monthly Payment $

With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan, assuming you're making full payments while in school.

Matt Carter contributed to the reporting of this article.

About the author
Emily Guy Birken
Emily Guy Birken

Emily Guy Birken is a Credible authority on student loans and personal finance. Her work has been featured by Forbes, Kiplinger’s, Huffington Post, MSN Money, and The Washington Post online.

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