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Yahoo
4 days ago
- Business
- Yahoo
Fixed vs. variable student loan rates: Which is best?
Key takeaways Fixed-rate student loans are usually best if you're exhausting your federal loan eligibility or prefer predictable monthly payments. Variable-rate student loans have interest rates that change with the state of the market. Fixed rates are best for people who have longer loans and want monthly payment stability. Variable rates are best for people looking to get lower rates when markets improve and pay off loans relatively quickly. Student loans can come with either fixed or variable rates. Private student loans have both options, but federal student loans only have fixed rates. Each works best depending on the situation, such as the type of student loan you're taking out. Fixed-rate loans are usually the safest choice for many students since it's hard to predict which direction rates will go, but both rate types have their pros and cons. Fixed vs. variable rates: Pros and cons Fixed-rate loans come with an interest rate that remains the same throughout the life of the loan, meaning you'll have predictable monthly payments. By comparison, variable-rate student loans have an interest rate that fluctuates based on market conditions. >>Learn more: How to calculate student loan interest rate Picking a variable-rate student loan could be beneficial in some scenarios, but it's tricky because market conditions are unpredictable. If the Federal Reserve (Fed) changes its benchmark rate, it can influence rates for borrowers with variable student loans. When the Fed lowers its benchmark rate, lenders might lower their minimum advertised rates. On the other hand, when the Fed increases its benchmark rate, lenders might increase their interest rates. Although the Fed's decision to lower or raise its benchmark rate doesn't impact rates for existing borrowers with fixed-rate student loans, it could influence rates for new borrowers. The fixed rate for federal student loans is adjusted annually on July 1 based on market conditions, and private lenders often adjust their fixed rates based on the market environment. Keep in mind: Your rate can affect other areas, such as your budget, your student loan payment and how your payment relates to your future income. Fixed-rate student loans Fixed rates remain constant during the loan term, which means your monthly student loan payments will be predictable as you pay off your debt. The only way to change a fixed interest rate is by refinancing the loan. While fixed rates are typically higher than the lowest advertised variable rates, they provide stability because the payment won't change. You'll know exactly how much you'll pay monthly and how much interest you'll pay overall. Pros Interest rate will never change Monthly payments are consistent You'll know how much interest you'll pay Cons Generally higher starting rates No benefit if interest rates drop Note that all federal student loans come with fixed rates. Since federal loans come with benefits that private student loans don't offer, like access to income-driven repayment plans and student loan forgiveness programs, we recommend that you exhaust your federal student loan eligibility first before turning to private student loans to fill in any funding gaps. Upcoming changes to student loan repayment options With the passage of the One Big Beautiful Bill Act, a lot of changes are in store when it comes to repayment options. Student loans expert Andrew Pentis breaks it down for you. Learn more Variable-rate student loans Variable interest rates are tied to market conditions, so your student loan payment could increase or decrease based on an adjustment in your interest rate. Lenders typically tie the loan's variable rate to a benchmark rate, like the prime rate or the Secured Overnight Financing Rate (SOFR) index, plus a fixed margin. While you might start with a lower payment than you would with a fixed-rate loan, your interest rate – and monthly payment – could rise later on. Pros Typically lower starting rates Benefit from market changes (in some cases) Lower monthly payments if interest rates are low Cons Rate can rise over time Monthly payment can change Can be more difficult to budget for Fixed or variable rate: When to choose Fixed interest rates are good for borrowers who don't have a lot of wiggle room to account for an adjusting interest rate. Variable-rate student loans are a good option if you qualify for the lowest rates available. As mentioned earlier, all new federal student loans have fixed interest rates, and fixed rates are typically an option with private lenders. Private student loans tend to offer variable interest rate options as well. The idea that fixed-rate student loans are always better is a common misconception, according to Lawrence D. Sprung, certified financial planner and founder of Mitlin Financial and Wealth Advisor. In comparison, Tayne advises most student loan borrowers to choose a fixed-rate loan because payments are predictable and easier to manage with their budgets. While she acknowledges variable rates may be better if the student can qualify for a lower rate and pay off the loan within a few years, she notes that it's rarely the case for college students with little income or savings. Here are some scenarios where choosing a student loan with a fixed rate can make sense: Fixed rates are better Variable rates are better You prefer predictable monthly payments. You plan to pay off your student loan early. You want to lock in a low fixed rate. You have extra room in your budget in case rates rise. You're choosing a long repayment term. You can qualify for the best rates and terms. Student loan calculator Want to figure out some of the logistics of your student loans and experiment with some numbers? Bankrate wants to help you crunch the numbers. Calculate now What to consider before choosing When deciding whether a variable- or fixed-rate student loan is best for you, Sprung says to consider the terms of the loan, economic or interest rate outlook and your financial situation. In addition, here are some other things to consider. Consider the type of student loan: If you're taking out federal student loans, your only option is a fixed interest rate. In contrast, most private lenders offer both. Think about how long it'll take to pay off the loan: The longer your student loan, the more time a variable rate will have to fluctuate. That makes variable rates a better choice for parents or students who are not deferring payment. Look at market conditions: Take a look at current economic conditions and whether interest rates are rising or falling. For example, the Federal Reserve has been working to lower its interest rate, but markets are currently uncertain. Ask about variable terms: If you're considering a variable-rate loan, ask the lender how often the rate changes and whether there's a maximum rate cap. Think about your risk tolerance: Consider whether you'd be okay with short-term interest rate fluctuations or if you'd rather have the peace of mind of a fixed rate. Look at your credit score: Variable rates are best for those who can get the best rates and terms. If your credit score is lower, you may need student loans for bad credit, most of which have fixed APRs. Take your time to think about each of these factors and how they might impact you if you were to choose a variable- or a fixed-rate student loan. And remember that you can change your mind later and refinance your loans if you decide the other option is better for you. Student loan refinance calculator Want to see if refinancing is right for you? Bankrate's student loan refinance calculator is here to help. Calculate now How to switch student loan rate types Just because you choose one type of student loan doesn't mean you have to stick with it for the life of the loan. You can refinance your student loans, which means swapping out your current student loans with a new private student loan. Keep in mind that there's no guarantee that refinancing later might be difficult, depending on your financial situation. 'Depending on where rates go, your credit history and income will impact how easy [it is to refinance],' Sprung says. 1. Fixed rate to variable rate If you have a fixed-rate federal or private student loan, it's possible to refinance to a variable-rate private student loan. Doing so could be a smart move if you can save money. That said, think twice about refinancing federal student loans because it means you'll lose access to federal benefits, such as federal forbearance. 2. Variable rate to fixed rate You can also refinance from a variable-rate private student loan to a fixed-rate private loan. Making this choice could be a wise move if you prefer predictable monthly payments and can qualify for a lower fixed rate. Bottom line A fixed-rate student loan may be the best option if you prefer a longer repayment period and stable monthly payments throughout the life of the loan. Plus, it's your only option if you're exhausting your federal loan options first, which experts often recommend. If you intend to pay off your loan faster and need a private student loan to fill in funding gaps, a variable-rate loan could be a better fit for you. Whichever option you choose, compare rates and terms from as many lenders as possible to get the best deal. You may also have to check into student loans for bad credit. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

Wall Street Journal
4 days ago
- Politics
- Wall Street Journal
New Federal Tax Credit Boosts School Choice—but Blue States Face Big Decision
School-choice advocates won a major victory with President Trump's tax megabill—but it comes with a catch. The federal government will now subsidize private-school tuition, via unusually generous tax credits for donations to nonprofits. However, governors must opt into the program. Democratic-led states may reject it, derailing school-choice advocates' goal for a nationwide effort.


Forbes
15-07-2025
- Business
- Forbes
Private Student Loan Rates: July 15, 2025—Loan Rates Start To Increase
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. Last week, the average interest rate on 10-year fixed-rate private student loans increased. But borrowers interested in pursuing private student loans to make up for a gap in college funding can still score lower rates than this time last year. According to from July 7 to July 12, the average fixed interest rate on a 10-year private student loan was 6.95%. It was 8.58% on a five-year variable-rate loan. That's for borrowers with a credit score of 720 or higher who prequalified on student loan marketplace. These rates are accurate as of the week of July 7, 2025. Related: Best Private Student Loans Last week, the average fixed rate on a 10-year loan rose by 0.65 percentage points to 6.95%. The average stood at 6.30% the week prior. Borrowers currently in the market for a private student loan will receive a lower rate than they would have at this time last year. At this time last year, the average fixed rate on a 10-year loan was 7.48%, 0.53 percentage points higher than today's rate. Let's say you financed $20,000 in student loans at today's average fixed rate. You'd pay around $232 per month and approximately $7,804 in total interest over 10 years, according to Forbes Advisor's student loan calculator. Average variable rates on five-year loans fell last week to 8.58% on average from 14.33%. In contrast to fixed rates, variable interest rates fluctuate over the course of a loan term. Variable rates may start lower than fixed rates, especially during periods when rates are low overall, but they can rise over time. Private lenders often offer borrowers the option to choose between fixed and variable interest rates. Fixed rates may be the safer bet for the average student, but if your income is stable and you plan to pay off your loan quickly, it could be beneficial to choose a variable loan. Financing a $20,000 five-year private loan at 8.58% would yield a monthly payment of approximately $411. A borrower would pay $4,666 in total interest over the life of the loan. But the rate in this example is variable, and it could move up or down each month. Before you look to a private student loan, consider a federal student loan as your first option. The interest rates on federal student loans are generally lower. Federal student loans also tend to have far more generous repayment and forgiveness options. Yet, if you've reached the borrowing limits for federal student loans or if you're ineligible for them, private student loans can be a good solution. When shopping for a private student loan, you'll generally need to apply directly through a non-federal lender. This includes banks, credit unions, nonprofit organizations, state agencies, colleges and online entities. It's important to note that you'll need a qualified co-signer if you have limited credit history, as undergraduates often do. When applying for a private student loan, take into consideration the following: Your qualifications. Private student loans are credit-based. Lenders typically require a credit score in the higher 600s. This is where having a co-signer can be particularly beneficial. Private student loans are credit-based. Lenders typically require a credit score in the higher 600s. This is where having a co-signer can be particularly beneficial. Where to apply. You can apply directly on the lender's website, via mail or over the phone. You can apply directly on the lender's website, via mail or over the phone. Your options. Look at what each lender offers and compare the interest rate, term, future monthly payment, origination fee and late fee. Also, check to see if the lender offers a co-signer release so that the co-borrower can eventually come off of the loan. The first step in finding the best private student loan is to take a look at the loan's overall cost. Consider both interest rate and fees. Also, look at the type of help each lender offers if you're not able to afford your payments. Remember, those with good or excellent credit typically get the best rates. How much should you borrow? Experts generally recommend borrowing no more than you'll earn in your first year out of college. How much can you borrow? Some lenders cap the amount you can borrow each year, while others don't. When you're shopping around for a loan, talk to lenders about how the loan is disbursed and what costs it will cover. If you need to borrow for school, federal student loans are generally the best option. This is because federal loans offer various borrower protections, such as access to income-driven repayment plans and student loan forgiveness programs. Additionally, most federal loans don't require a credit check or co-signer. The rate you receive depends on whether you're getting a fixed or variable loan. Rates, in part, are based on your credit profile. Those with higher credit scores often get the lowest rates. But your rate is based on other factors as well. Income and even the degree you're working on and your career can play a part. While private student loans shouldn't necessarily be your first financial aid option, they can come with a variety of benefits, including the following: You can often borrow as much as you need. Some private lenders let you borrow up to your school-certified cost of attendance, minus any previously awarded financial aid. Some private lenders let you borrow up to your school-certified cost of attendance, minus any previously awarded financial aid. You might not have to pay fees. The best private lenders don't charge origination or disbursement fees, so you won't have extra charges on your loan in addition to interest. The best private lenders don't charge origination or disbursement fees, so you won't have extra charges on your loan in addition to interest. Good credit means better interest rates. While your credit score doesn't matter with most types of federal student loans, it does impact private borrowing. Lenders often offer competitive rates to borrowers with excellent credit or a creditworthy co-signer . While your doesn't matter with most types of federal student loans, it does impact private borrowing. Lenders often offer competitive rates to borrowers with excellent credit or a . It's easy to apply online. Applying for a private student loan is often a quick online process that you can do at any time throughout the school year. Many lenders also let you prequalify for loans online, making it easy to shop around and compare offers from multiple banks. Applying for a private student loan is often a quick online process that you can do at any time throughout the school year. Many lenders also let you prequalify for loans online, making it easy to shop around and compare offers from multiple banks. International students may be eligible. Some lenders provide loans for international students attending school in the U.S. If you're an international student, you may have to apply with a U.S.-based co-signer to qualify. Some lenders provide loans for international students attending school in the U.S. If you're an international student, you may have to apply with a U.S.-based co-signer to qualify. Your lender may offer useful perks. Depending on the lender, you may qualify for some, from interest rate discounts to cash-back bonuses. Some offer a range of repayment terms, lengthy grace periods, forbearance and deferment options and other borrower protections.


UAE Moments
07-07-2025
- Business
- UAE Moments
Abu Dhabi Schools Can Withhold Certificates for Unpaid Fees
In a significant policy update, the Abu Dhabi Department of Education and Knowledge (ADEK) has announced that private schools are now permitted to withhold student certificates if tuition fees remain unpaid —as long as the process follows a transparent and fair protocol. The new rule, which applies across all private schools in Abu Dhabi, aims to strike a balance between financial responsibility and student welfare. According to ADEK, schools must clearly outline their late payment policies on their official websites and provide reasonable, flexible installment plans for parents—without resorting to excessive penalties. "Schools must not contact students directly regarding unpaid fees, even if the result is enrollment suspension," the authority emphasized. To protect student privacy, confidentiality must be maintained at all times. Schools are prohibited from publicly disclosing or drawing attention to any student's unpaid fees. How Will It Work? Under the updated framework, schools are permitted to collect the first installment of tuition fees one month before the academic year starts. The remaining amount must be split into three or more equal installments, with payment schedules shared publicly and agreed upon by both parties. Contracts or written agreements may also be signed between parents and schools to ensure both sides understand their obligations. Ministry Confirms 14 Curricula Now Eligible for Grade 12 Certificate Equivalency In a separate announcement, the UAE Ministry of Education revealed that Grade 12 certificates from 14 international curricula taught in the UAE are now eligible for official equivalency—an essential step for university admissions and job applications. To obtain equivalency, students must provide: The ministry also clarified that certificates from open education or distance learning programs will not be considered for equivalency. Additional requirements include: Applicants have seven days to submit all required documents. If incomplete, the application will be closed after three failed contact attempts. The equivalency service costs Dh50 and takes approximately five working days. Submissions can be made via the Ministry of Education's website or approved mobile app.


Bloomberg
03-07-2025
- Business
- Bloomberg
The Tax Bill's Private School Loophole Would Make DOGE Cry
An obscure provision in the budget reconciliation bill just passed by the Senate could expand access to private school education; help the wealthy offload stocks without paying capital gains taxes; and make DOGE — if it had feelings — cry at its inefficiency. The policy would allow donors who give to an eligible scholarship-granting organization to be reimbursed dollar-for-dollar in the form of a tax credit up to $1,700 (down from $5,000 in earlier drafts). Families making up to three times the average income would be eligible for these scholarships, which is to say, most families with school-age children.