Understanding Interest Rates, Fees and Interest Capitalization - Interest Rates Tab

Interest Rates

The interest rate on a loan can be fixed – a rate that stays the same over the life of the loan – or variable – a rate that fluctuates over the life of the loan.

Fixed Interest Rates

The interest rate charged on a fixed rate loan will remain the same for that loan's entire term, regardless of changes to the market interest rates. Attributes of fixed rate loans include:

• Payment amounts will be the same every month, which allows for a consistent way to manage your budget.
• If market interest rates go up, your fixed rate will remain the same.

Federal Direct Loans have a fixed interest rate for the life of the loan.

---

Variable Interest Rates

The interest rate charged on the outstanding balance of a variable rate loan will change periodically. Variable interest rates can change annually, quarterly or even monthly. Attributes of variable rate loans include:

• Payment amounts may not be the same every month, making it difficult to manage your budget.
• Your interest rate may be lower or higher depending on market conditions.

Private loans typically have a variable rate, though this is not always the case.