Variable vs. Fixed Interest Rates on Student Loans: Which Is Best for You?

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution.

variable interest rate

We’ve got your back! Student Loan Hero is a completely free website 100% focused on helping student loan borrowers get the answers they need. Read more

How do we make money? It’s actually pretty simple. If you choose to check out and become a customer of any of the loan providers featured on our site, we get compensated for sending you their way. This helps pay for our amazing staff of writers (many of which are paying back student loans of their own!).

Bottom line: We’re here for you. So please learn all you can, email us with any questions, and feel free to visit or not visit any of the loan providers on our site. Read less

Variable-rate student loans can be an attractive option, but most students (as a practical matter) stick with fixed-rate student loans. When looking at variable- versus fixed-rate student loans, here are six things to know about both.

Variable vs. fixed interest rate student loans

A variable interest rate fluctuates over time, while a fixed interest rate remains the same over the life of a loan.

If you borrow private student loans, you can choose between variable or fixed. If you borrow federal student loans, you can only have a fixed interest rate.

Variable interest rate student loans: 6 things to know

1. Choices
2. Starting interest rates
3. Index movements
4. Savings
5. Possible higher payments
6. Rate changes and caps

1. Choices

As a reminder, you’ll only have to decide between a variable rate and a fixed rate if you borrow a private student loan. Private student loan lenders can choose to offer both options.

2. Starting interest rates

A variable-rate student loan typically comes with a low-end interest rate that is below that of a fixed rate — and sometimes significantly lower.

Variable APRs for College Ave undergraduate student loans start at 1.04%, for example, while fixed APRs start at 3.34%.

3. Index movements

Many private student loan lenders tie variable interest rates to the one-month (such as Sallie Mae) or three-month (such as Discover) Libor Interbank Offered Rate, a market benchmark.

The Libor is often impacted by the Federal Reserve federal funds rate, said Mark Kantrowitz, publisher of If the Federal Reserve announces a quarter-point increase, the Libor will often change within three months, Kantrowitz said.

Federal Reserve officials have indicated that they want to hold rates steady through 2020.

4. Savings

A variable-rate loan could save you money compared with a fixed-rate loan if the initial rate is lower and the borrower is confident that they can pay it off before the midpoint of the loan term, Kantrowitz said.

For instance, let’s assume you borrowed a seven-year private student loan but pay it off in three-and-a-half years. Despite possible increases in those early years, Kantrowitz said your weighted average interest rate at the midpoint would likely be close to the fixed rate you would have received.

5. Possible higher payments

A variable-rate loan could make sense if rates seem to be heading lower or holding steady.

A one percentage point increase in the interest rate on a variable loan, Kantrowitz said, can increase the monthly loan payment by as much as 5% on a 10-year term, 10% on a 20-year term and 15% on a 30-year term.

6. Rate changes and caps

If you’re exploring a variable-rate loan, ask lenders how often their rates change. Some lenders will adjust the rate monthly (such as Earnest), while others will adjust every three months (such as Education Loan Finance).

Also, find out if your variable student loan rates are capped. For example, SoFi private student loan variable rates were capped at 13.95% as of Jan. 29, 2020.

Fixed interest rate student loans: 6 things to know

1. Same monthly payments
2. Interest rate ties
3. Factors
4. Advertised rates
5. Repayments
6. Shorter loans, better rates

1. Same monthly payments

Fixed-rate federal and private student loans provide peace of mind because you will always know what your monthly payments will be. This can be especially important if you intend to pay off a student loan over a longer period of time, such as 10 to 25 years.

2. Interest rate ties

Fixed interest rates for federal loans are tied to the 10-year U.S. Treasury note. The interest rates for federal loans are announced each May and go into effect on July 1.

Here are the fixed interest rates for federal loans disbursed on or after July 1, 2019, and before July 1, 2020:

3. Factors

While federal loans have the same interest rates for everyone, private loans come with different interest rates depending on a variety of factors, including the credit score of the borrower or cosigner. The rate might also depend on a student’s major.

Fixed APRs for CommonBond undergraduate student loans range from 3.74% to 10.74%, for example, while Ascent cosigned student loans range from 3.39% to 14.50%.

4. Advertised rates

When you look at advertised interest rates for private loans (fixed or variable interest), the ranges can be huge. Kantrowitz estimates that less than 10% of borrowers get the best-advertised interest rate, so keep that in mind when you are rate shopping.

5. Repayments

Kantrowitz said 10-year repayments used to be common for fixed-rate private student loans, but now you’re seeing lenders offering a wide range of repayment periods.

Citizens Bank undergraduate student loans, for example, offer five-, 10- and 15-year repayment terms, while MPower Financing student loans come with one option: 10 years.

6. Shorter loans, better rates

Shorter fixed-rate loans have lower starting interest rates built in, Kantrowitz said, since they are less risky for lenders in brief periods. Most of the savings from a short-term fixed-rate loan will come from the condensed repayment period rather than a lower interest rate, Kantrowitz said.

Refinance your student loans to switch between variable, fixed

If interest rates are rising (or dropping), it could make sense for borrowers to refinance their student loans.

To refinance, you’ll need to meet certain requirements:

  • Credit score
  • Annual income
  • Savings
  • College degree (or certificate of enrollment if you’re still a student)

If you’re switching from federal student loans to private loans, be aware of the protections you’ll lose, such as income-driven repayment plans and the possibility of loan forgiveness.

To help decide if refinancing is right for you, try using our student loan refinancing calculator.

Miranda Marquit contributed to this report.

Interested in refinancing student loans?

Here are the top 6 lenders of 2021!
LenderVariable APREligible Degrees 
1.89% – 5.99%1Undergrad
& Graduate

Visit Splash

1.99% – 5.64%2Undergrad
& Graduate

Visit Earnest

1.99% – 6.84%3Undergrad
& Graduate

Visit CommonBond

1.91% – 5.25%4Undergrad
& Graduate

Visit Lendkey

2.25% – 6.53%5Undergrad
& Graduate

Visit SoFi

2.17% – 4.47%6Undergrad
& Graduate

Visit PenFed

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of Feburary 1, 2021.

2 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.

3 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. ‍All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.

4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 02/17/2021 student loan refinancing rates range from 1.91% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.

5 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: 1. Fixed rates from 2.99% APR to 6.99% APR (with AutoPay). Variable rates from 2.25% APR to 6.53% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.12% plus 2.38% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The discount will not reduce the monthly payment; instead, the interest savings are applied to the principal loan balance, which may help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score.Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

6 Important Disclosures for PenFed.

PenFed Disclosures

Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99%-5.15% APR and Variable Rates range from 2.17%-4.47% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.