Interest Rate

Educational loans usually have a varied rate of interest. The benefits to this are if the interest rates fall below average then the student can take advantage of lower interest on their repayments. The disadvantages to this are if the interest rates suddenly rose, then the student would be faced with a much higher repayment than expected. Flexible rates of interest can make it difficult to plan exact repayments. Some student loans offer a cap on the flexible rates of interest which means it cannot rise higher than a certain level which could be helpful during extreme circumstances.

A student can however consolidate their loan and lock into a fixed rate of interest. The fixed rate of interest is helpful due to the ability to exactly plan the total amount of loan repayable. This can be handy if the student has a budget of their finances. The downsides to fixed interest rates is that if the interest rate suddenly fell then the student would still be required to pay interest at the pre-determined rates. Due to the long amount of time that a student has to repay a loan, the future market should be anticipated to decide which type of interest rate works better.

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