Fixed interest rates better for college loans
Iowa families often use private student loans to help pay for college and many are turning to variable-rate options. Choosing a rate based on benchmark indexes that change over time is a risky move. A fixed interest rate is locked in for the life of the loan and is a less risky option, when rates are rising.
According to LendEDU’s “The State of Private Student Loans” report, which collected data on 80,000 private student loan applicants since 2016, 94 percent of private student loan applicants in the study chose a variable interest rate, with an average rate of 7.81 percent.
Iowa families, whether their student is attending school in state or out of Iowa, have an alternative to variable rate options through the state’s nonprofit provider that offers competitively priced loan products with less risk, when choosing their fixed-rate option.
Iowa Student Loan offers applicants with a credit score of 739, the average listed for those included in the report, an average fixed interest rate of 6.52 percent for loans where repayment is deferred. That’s a set rate that is much lower than the average variable rates many families appear to be choosing.