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Fixed Rate Student Loan – How You Get Them & Interest Rates

March 19, 2012

Fixed Rate Student Loan

Fixed Rate Student Loan

A fixed rate student loan will allow you to know what you are going to pay in interest each month when your repayment period starts all the way to the last payment needed to pay back the loan, unlike a variable rate which goes up and down as the market does. The only way you can get a fixed rate loan is by attaining a federal loan, which the federal fixed rate student loans are the Federal Perkins Loan as well as the Federal Stafford Loan. Now how do you obtain a federal fixed rate student loan? The way you do so by filling out a Free Application for Federal Student Aid (FAFSA) which can be done as soon as January 1st of each year that you are need federal financial aid for your schooling.

Fixed Rate Student Loan Rates

Now when it comes to what type of fixed rate you will get on your federal student loan, current rates consist of:

  • 5% for Perkins Loans
  • 6.8% for the Stafford Loans
  • PLUS Loans – Which are fixed rate student loans that are taken out by the parent or gaurdian of the student, come with a fixed rate of 7.0 percent.

Not only are these rates significantly lower than private student loans, federal student loans come with much better and more flexible repayment terms. Filling out a FAFSA will not only show you how much you will qualify for in the form of a fixed rate student loan, it will also allow you to find out if you are eligible for getting federal grant money as well as there are various grant programs that are affiliated with the FAFSA. The Perkins Loans as well as the Stafford Loans are not credit based meaning that your credit score doesn’t have anything to do with becoming eligible for a loan.

Private loans can be nice if federal student loans do not provide you with enough money for school, and they can even be advertised with a lower interest rate then federal loans, but again you have to remember that all private student loans are variable and can go much higher than fixed rate student loans, and usually do. Getting a fixed rate student loan will also allow you to set up a budget on what you need to spend on your loan payment each month when you start paying it back, which will allow you to know exactly what you need to spend instead of not knowing each month with variable rate student loans.

But it should be known that if you have to take out private student loans, then make sure that you either have a good credit score by getting it through a provider like Equifax, and if you don’t then make sure to get a co-signer who has a good credit score as this will provide you with a lower interest rate. Later on usually after a year or two of on-time repayment, you can then have the loan transferred to your name and start building your own credit score.

Income Based Repayment For A Fixed Rate Student Loan

Federal student loans with fixed rates also do not come with repayment penalties if you choose to pay more than the minimum, which will allow you to pay off your student loans much faster without being financially penalized for it. These federal fixed rate student loans also come with a repayment option called the Income Based Repayment (IBR) which you monthly student loan payment amount is based of a small percentage of what you earn each month, which is usually around 15 to 20 percent, which the payment can be as little as $5 a month if one is unemployed.