Variable Interest Rate Student Loans

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When you go to take out a student loan, you’ll have several options to choose from, including private, federal, fixed rate, and variable interest rate student loans.

Variable rate student loans refers to debt that has a fluctuating interest rate. Typically, these types of debts start out with low introductory interest rates that slowly increase during your term. By the end of the term, your interest rate may be considerably higher than it was at the start of the term.

While interest rates typically rise, it’s also possible for rates to decrease over time, meaning you can potentially pay less in interest than you would with a fixed-rate option.

Lenders set variable rates based on index rates. As the index rate changes, your variable interest rate may fluctuate.


Generally speaking, variable-rate student debt is best if you expect to be able to pay off your balances early so that you can take advantage of the low introductory rates.

Types of Variable Interest Rate Student Loan

If you want to apply, you only have one option: private student loans.

Federal student choices have fixed interest rates that are set by Congress on an annual basis. If you take out a federal student option, your interest rate will be the rate set by Congress in the year that you borrowed the money.

Private lenders, on the other hand, offer variable-rate loans and fixed-rate student loans, leaving it up to you to decide which you prefer.

Private options, while often less flexible than federal student products, can still offer very competitive interest rates and repayment terms.

If you’re interested in borrowing variable-rate student debt, private lenders are a solid option.

How Much Does a Variable Interest Rate Student Loan Cost?

Since variable interest rate student loan is so unpredictable, it’s more or less impossible to determine how much the total cost will be.

In general, variable rates start lower than fixed rates but can rise to be much higher by the end of your term. Currently, you can find variable rates starting as low as 2.49%, but it’s difficult to predict how much your rate could rise or fall in the future.


Aside from the interest rate, you also need to consider your balance, term, and fees.

Borrowing limits are typically dependent on your college or university’s total cost of attendance. This includes housing, food, tuition, books, and other expenses.

Terms vary depending on the repayment plan you negotiate with your lender. That being said, terms for private student options tend to be between five and 15 years. Longer terms mean you’ll pay more in interest, and there will be more potential for your rates to increase.

Lastly, don’t forget to ask your lender about any potential fees. Prepayment, late payment, processing, origination, and other fees can add up if you’re not careful.

Benefits of Variable Rate Student Loans

Benefits include:

  • Potential to save money on interest
  • Low introductory interest rates
  • Flexible repayment terms
  • Can be used to finance all education-related expenses
  • Available from a wide range of lenders

While fixed-rate student debt may be better for those that prefer more predictability in their payments, variable-rate student debt can help students save money on interest if rates fall or they are able to pay off their balances early.

Tips for Applying for a Variable Rate Student Loan

Applying is a fairly straightforward process, but it’s important to be prepared before diving in.

Follow these tips to make applying as easy as possible.

- Compare Lenders

When applying for any type, one of the most important steps is to compare rates, terms, and fees from multiple lenders.

- Prepare Your Documents

Most lenders will require the following documents to complete your application:

  • Social Security Number
  • Personal Identification
  • Proof of Income
  • Proof of Employment
  • Cost of attendance
  • Proof of Enrollment
  • Co-signer Information
  • And more

Be sure to check your lender’s requirements to ensure you have all the necessary documents to submit your application.

- Apply

Lastly, you need to submit your application.

If you are approved, you should receive an offer letter from your lender dictating the terms, including your interest rate, term, fees, disbursement method, and more.

If you agree to these terms, you can accept the offer and receive your financial aid.