Student loan borrowers prefer fixed interest rates
A surge of college borrowers is expected to flood the private student loan market this summer. Each private loan applicant must choose between a fixed interest rate that remains constant and a variable rate that fluctuates with market conditions.
Private lenders say the response from their current borrowers has been resounding, with an overwhelming majority choosing fixed rates over the variable option.
Lender data shows fixed-rate student loans dominate borrower choices
The numbers from individual lenders reveal the scale of the fixed-rate preference among private student loan borrowers across the market today. Earnest, a major private lender, reported that 99.6% of its refinance borrowers chose a fixed-rate loan in 2025, U.S. News reported.
Among in-school borrowers at Earnest, 97.5% also selected fixed rates, only marginally below the refinance figure, U.S. News noted. "It was higher than I expected when I reached out to our data team," Kaydee Ambas, a certified financial education instructor at Earnest, told U.S. News.
And federal loans may offer special benefits for specific groups of borrowers, says student loan expert Andrew Pentis.
Federal loans are especially valuable if your income level qualifies you for subsidized loans, or if you're planning a career that tracks to a federal forgiveness program.
Smaller lenders reported similar numbers in their borrower data collected from recent originations across the private student loan market. Fewer than 5% of Abe borrowers select a variable rate, Steve Winnie, chief operating officer of Monogram LLC, which created and administers the Abe lending platform, told U.S. News.
Ken Ruggiero, founder and CEO of Ascent Funding, reported that fewer than 10% of his company's borrowers settle on variable rates.
Roughly one in five Sallie Mae borrowers choose variable rates, the highest share among the lenders surveyed by U.S. News. "That figure has remained relatively consistent over the past several years," Sallie Mae spokesperson Katarina Ellison told U.S. News.
How repayment timeline shapes the fixed vs. variable student loan decision
The choice between fixed and variable rates is not purely about which number looks lower on the day a borrower signs the loan agreement. Repayment timeline, anticipated budget flexibility, and personal risk tolerance all play a role in which structure fits a borrower's situation, U.S. News reported.
"Variable rates are a bet that rates will stay flat or fall during your repayment window," Ambas said in the U.S. News report. "If you're trying to pay off your loan within three years and you have the income flexibility, it could be a reasonable bet."
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Ambas told U.S. News that borrowers on longer repayment schedules face a fundamentally different risk calculation when considering variable-rate student loans. "But if you're looking at a longer timeline, like a 10-year repayment horizon, then you're betting on a decade of rate stability, and that's a harder bet to make," she said.
Variable-rate loans often start with a lower introductory rate than fixed alternatives, which can look appealing on the initial loan offer, U.S. News noted. That lower starting rate may save money if a borrower repays the balance quickly, but the advantage shrinks on a longer repayment schedule.
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Rate caps and risk tolerance are key for variable student loan borrowers
Most private lenders cap their variable rates to prevent payments from rising without limit if market conditions shift suddenly, the U.S. News report noted. Borrowers considering variable-rate loans are advised by lenders to read the fine print and confirm whether their loan includes a ceiling on increases.
Caps on longer-term loans tend to be higher than those on shorter repayment periods, meaning a 15-year variable loan carries a bigger ceiling. Ambas recommended calculating the monthly payments if the rate reached that upper limit and determining whether those payments would remain affordable.
"The biggest risk is that the rate can go up and that could impact your budget severely," Ambas warned in the U.S. News report.
Borrowers who cannot absorb a significant payment increase may find that the potential savings of a variable rate are not worth the financial exposure.
The decision comes down to personal financial circumstances and how much payment volatility a borrower can handle over the life of the loan. Federal student loans, which account for more than 90% of all outstanding student loan debt, carry only fixed rates set annually by the government.
That structure means the fixed-versus-variable question is exclusive to private borrowers entering a growing and increasingly competitive market.
Related: The student loan refinancing decision that haunts borrowers
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This story was originally published May 26, 2026 at 1:17 PM.