Annual Percentage Rate (APR) is the yearly cost of borrowing a loan. It is shown as a percentage of the borrowed amount. Lenders must provide you with an annual percentage rate so that you can figure out how much borrowing a loan is expected to cost you each year. APR is calculated the exact same way on different loans from different lenders. This makes it possible for a student to compare various educational loans with different terms and conditions.

The initial APR is calculated using the maximum permitted rate which can be much higher than the actual rate. This is because the variable rates on student loans are impossible to predict over the entire term of the loan. Providing the highest possible APR means that a student will always be aware of the total maximum amount their loan could cost provided that the payments are all paid on time. The actual costs on the loan will usually be lower. They will never know the exact amounts but they will be sure to not go above the maximum amounts unless the payments are not made on time. If the payments are incomplete or late then the APR costs will be higher than anticipated.

More Terms Explained here