How to Choose Between Variable And Fixed Rate Student Loans

August 01, 2016 · 2 minute read

How to Choose Between Variable And Fixed Rate Student Loans

Got student loans? We’ve got you covered with our Student Loan Smarts blog series. Our expert tips and hacks may help you save money, pay off loans sooner, and reduce stress over student loan debt.

So, you’ve settled on student loan refinancing. You’ve filled out the application, have gotten approved (congrats!), and now you’re faced with a couple of loan options—including the choice between a fixed vs. variable rate student loan.

Even if you’re already familiar with both, factors like changing interest rates and your own financial situation have bearing on which type of loan is right for you.

What do you need to know before making a decision? Here’s the scoop on how these two options differ.

Fixed-Rate Student Loans:

•   Generally, have a higher interest rate than variable rate student loans
•   Are not affected by interest rate changes
•   Charge the same interest rate over the life of the loan

Variable-Rate (or Floating-Rate) Student Loans:

•   Generally have a lower initial rate than fixed rate loans
•   Are affected by interest rate changes, so your loan’s rate can go up or down on a monthly, quarterly, or annual basis

How to Choose

Your final decision depends on your situation. If you plan to pay off your loan relatively quickly (lucky you), a variable rate student loan may help you save you money.

However, be aware that the longer it takes you to pay off the loan, the more opportunity there is for interest rates to rise. You can mitigate your risk by choosing a lender that caps its variable rates.

If you don’t plan to pay off your student loan quickly, if your future income level is uncertain, or if you’re simply uncomfortable taking on extra risk, consider a fixed rate student loan. In today’s low interest rate environment, fixed rates can be competitive.

If you have a high interest rate grad school loan, for example, you could get a lower fixed rate by refinancing your student loans.

Whether you choose a fixed rate or variable rate student loan, the main thing to remember is that the rate you got when you first took out your loan doesn’t have to be the rate you’re stuck with for life. Knowing your refinancing options can help put your mind at ease—and hopefully save you some money, to boot. Looking to understand more about student loans? Check out our student loan help center and find calculators and resources to help you manage your student debt.


The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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