Every year, 30% to 40% of undergraduate students take out federal student loans to help fund their college education and almost 50% of grad students take out graduate loans. While all federal student loans have fixed interest rates, private student loans can have fixed or variable interest rates.
When it comes to fixed vs. variable interest student loans, it’s important to understand the difference between the two. Fixed interest rates do not change throughout the loan term. Your monthly payment will remain the same unless you choose to refinance through a private lender and get a new loan with a new rate.
Variable rates, on the other hand, fluctuate with the market. Your rate could go up or down throughout the term of the loan, making monthly payments less predictable than with fixed interest rates.
What factors are worth considering before deciding between fixed or variable student loans? Read on to learn about the ways these two student loan options differ.
Table of Contents
Key Points
• Federal student loans only offer fixed interest rates, while private student loans may have fixed or variable rates.
• Fixed rates remain constant over the life of the loan, offering predictable monthly payments.
• Variable rates can fluctuate with the market, potentially increasing total repayment cost.
• Generally speaking, borrowers planning to repay over the short term, may want to consider variable rate loans, while those seeking stability may prefer fixed rate loans.
Fixed Rate Student Loans
Federal student loans for undergraduate and graduate students have fixed rates. These loans have a locked-in interest rate for the entire loan term. This means that the interest rate on the loan when it is originally borrowed will be the same rate at the end of the term.
The only ways a borrower would be able to change the interest rate is to refinance student loans with a private lender or consolidate federal loans through the government.
When you refinance your federal or private student loans, what determines your student loan refinance rate is the market and your personal financial situation, such as your credit profile and your debt-to-income (DTI) ratio.
With a federal Direct Consolidation Loan, your interest rate is the average of the loans you are consolidating, rounded up to the nearest one-eighth of a percent. This rate is always fixed.
Fixed-rate student loans are typically considered the safer option as there is no chance the interest rate will rise. All federal student loans (since July 1, 2006) have fixed interest rates that are set by Congress. No matter which federal loan you qualify for, your interest rate will not change over the life of the loan.
Each type of federal loan will have its own fixed interest rate. For example, when it comes to grad school loans, Direct PLUS Loans for graduate and professional students and parents have a different fixed interest rate than Direct Unsubsidized Loans for graduate and professional students. For loans disbursed between July 1, 2025 and July 1, 2026, Direct Unsubsidized Loans have a rate of 7.94%, while Direct PLUS Loans have a rate of 8.94%.
Undergraduate Direct Subsidized Loans and Unsubsidized Loans disbursed between July 1, 2025 and July 1, 2026 have a fixed interest rate of 6.39%.
Pros of Fixed Rate Student Loans
Fixed-rate loans have benefits and downsides. The advantages include:
• They’re not affected by market rate changes.
• The monthly payments stay the same throughout the life of the loan.
Cons of Fixed Rate Student Loans
There are possible drawbacks of fixed rate loans, such as:
• Market rates could decrease, meaning you could miss out on potential savings.
• Borrowers can’t take advantage of interest rates if they go lower unless they refinance.
Recommended: Student Loan APR vs. Interest Rate
Who Should Choose a Fixed-Rate Student Loan?
While deciding between a variable or fixed-rate student loan, the choice ultimately depends on your specific financial situation.
That said, for borrowers who anticipate repaying student loans over a longer time period, those who prefer a predictable payment each month, or individuals whose future income level is uncertain, a fixed rate student loan may make more sense.
Also, if a borrower is eligible for federal student loans, these fixed-rate loans are typically considered a wiser choice because they come with federal programs and protections, including income-driven payment plans and student loan forgiveness.
Variable Rate Student Loans
As mentioned above, all federal student loans have fixed interest rates. Whether they’re looking for graduate loans or undergraduate loans, borrowers will only have the option to choose a variable rate student loan when taking out a private student loan from a private lender.
Variable rate student loans can be riskier than fixed interest loans. This is because the interest rate on a variable rate student loan can change (increase or decrease) throughout the life of the loan based on how the market performs at any given time.
While it can be a good thing if the interest rate goes lower than your original rate, there is also a possibility that the interest rate can increase.
Before choosing a variable rate student loan, it can be a good idea to know the average student loan interest rate and to ask your lender how often your interest rate can change on their end. Each lender has their own way of adjusting rates (some do it every month, where others will do it every few months).
You can also ask if there is a cap on the rate — some lenders will implement a cap so that a variable rate can’t exceed a certain percentage.
Pros of Variable Rate Student Loans
Just like student loans with fixed rates, variable rate loans also have potential benefits and drawbacks. The advantages include:
• May benefit from certain changes in the market.
• Borrowers could potentially save money if the interest rate drops.
Cons of Variable Rate Student Loans
There are also possible drawbacks of variable rate loans to consider, such as:
• Your loan’s rate can go up or down on a monthly, quarterly, or annual basis. Thus, the monthly payment may not remain stable, and may increase or decrease as the interest rate changes.
• For those paying off their loan over a fairly long timeline, the interest rate has more time to potentially go up, which could cost the borrower more in interest over the life of the loan.
Who Should Choose a Variable Rate Student Loan?
Once again, the choice of a variable interest rate vs. fixed student loan interest rate depends on your particular financial situation.
However, if you anticipate being able to pay off your loan over the shorter term, variable rate student loans might be an option to explore.
Recommended: When Do Student Loan Rates Increase?
Fixed vs Variable Student Loans: How to Choose
First and foremost, as noted, the final decision depends on your unique situation.
Just be aware that the longer it takes you to pay off the loan, the more opportunity there is for interest rates to rise with variable rate student loans, depending on the factors that affect student loan interest rates. You can help mitigate your risk by choosing a lender that caps its variable rates, but the rates will still fluctuate.
For borrowers who anticipate repaying student loans over a longer time period or those whose future income level is uncertain, a fixed rate student loan may make more sense.
Fixed vs Variable Student Loan Comparison
Here’s a side-by-side comparison of how fixed vs. variable interest rate loans compare.
| Fixed rate student loan | Variable rate student loan | |
|---|---|---|
| Applies to | Federal and private student loans | Private and refinanced student loans only |
| Interest rate | Stays the same for the life of the loan | Can go up or down due to market changes |
| Monthly payment | Doesn’t change | May increase or decrease |
| Considerations | Offers protection from rising rates; borrowers cannot take advantage of lower rates unless they refinance | Possible risk of rising rates and higher payments (however, rates and payments could also go down) |
Securing a New Interest Rate with Student Loan Refinancing
Whether you originally borrowed a fixed or variable student loan, one thing to remember is that the rate assigned when the loan was initially borrowed doesn’t have to be the rate for the entire life of the loan. Some borrowers might consider refinancing to change their rate.
For those wondering, should I refinance my student loans?, learning what the process involves may be helpful in making a decision. When you refinance, you exchange your old loans for a new private loan, ideally one with a lower interest rate, if you qualify.
Depending on student loan refinancing rates and your financial profile, refinancing might help you spend less in interest over the life of the loan.
You can use a student loan refinancing calculator to crunch the numbers to see if refinancing makes sense for you.
However, refinancing student loans is not the right option for everyone. Refinancing federal student loans makes them ineligible for federal forgiveness benefits and borrower protections like income-driven repayment and deferment. If you plan to use these benefits now or in the future, it is not recommended to refinance your student loans.
The Takeaway
The difference between fixed and variable rate student loans is that a fixed interest rate remains the same throughout the entire life of the loan, while a variable rate fluctuates with market changes over time.
All federal student loans have fixed interest rates that are set by Congress. Private student loans may be either fixed or variable.
For borrowers looking to change their student loan from fixed rate to variable rate or variable to fixed, or those who are hoping to get a lower rate to save money on interest, student loan refinancing is one option they could explore.
FAQ
Is a student loan variable or fixed rate?
All federal student loans are fixed rate loans. Private student loans may be fixed rate or variable rate.
Are federal student loans fixed or variable?
All federal student loans are fixed rate with interest rates that are set by Congress. This means that no matter what type of federal loan you qualify for, your interest rate will not change over the life of the loan.
Can I switch from a variable rate student loan to a fixed rate?
If you have federal student loans, there are two possible ways to switch from a variable rate student loan to a fixed-rate loan: through student loan refinancing with a private lender, in which case you replace your old loans with a new loan with new terms, or by consolidating your loans through the federal government. However, be aware that refinancing federal student loans makes them ineligible for federal benefits like income-driven repayment and federal deferment.
If you have private student loans, it’s possible to switch from a variable to fixed rate through refinancing.
Which is better for graduate loans — fixed or variable interest rate?
Both fixed and variable rate loans have pros and cons, and only a borrower can decide what’s best for their situation. With a fixed rate loan, you might miss out on some potential savings if market rates decrease. However, fixed rates remain the same over the life of the loan, so your payments won’t fluctuate and you can plan for it accordingly.
The interest rate on variable rate loans can go up and down based on market conditions. In a high interest rate environment you could end up paying more in interest. But if interest rates drop, you could pay less.
What are the risks of a variable rate loan for grad school?
With a variable rate loan for grad school, there is the risk that the interest rate could rise with economic conditions, meaning your payments would be higher. Of course, the rates could also go down. One thing to keep in mind is that if the term of your loan is a long one, the interest rate has more time to fluctuate, which could potentially end up costing you more in interest.
What factors should I consider when choosing fixed vs. variable student loans?
When choosing fixed vs. variable rate student loans, weigh the pros and cons. Fixed rate loans have interest rates that remain the same over the life of the loan so your monthly payments won’t change.
The rates on variable rate loans can fluctuate depending on market conditions. You could end up paying more in a higher interest rate environment — or less if interest rates drop.
SoFi Student Loan Refinance
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