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Research: Are Private Variable-rate Student Loans an Option? -

Before I entered college, I was told so many things about student loans, ranging from 'don`t get any' to' get as many as you can because of the low interest rate`. For a 17 year old with no financial know-how, student loans were the scariest thing to me, I was thankful for the help of a financial advisor to help me make sound financial decisions in college.

I went the route of not acquiring any loans, but establishing a small line of credit with my bank in case of emergencies. And boy, did it seem that I had an emergency every week - got to find a new dress for the Frat party, dinner date with Suzie, car expenses after a flat tire, and so on, and so on, the reasons began to pile up.

But if you decide to go a different route and acquire student loans, it`s important to get the most up to date information out there and act accordingly.

Student loans come in two forms: fixed rate or variable rate. Currently, fixed rates for a private loan are at 7.75%, while variable rates are at 3.25%. Private loans should only be pursued after all federal loans and scholarships have been exhausted. As private loans usually have higher interest rates than federal loans. Currently, the fixed rate for a federal subsidized Stafford loan is 3.4%, and 6.8% for an unsubsidized loan.

A private loan should be the last option for the young college student. Students may want to check into a federal PLUS Loan which is a loan that a students parents take out, which holds a fixed interest rate of 7.9%. If you have to even consider taking out a personal loan to finance your college education, the school you might be going to is clearly out of your price range. But if the loan is all that stands between you and a college education, then proceed with caution.

The good news is that the market is that competition is heating up as different companies adjust their interest rates. Over the past couple of years, rates have come down drastically, and banks such as Wells Fargo and U.S. Bank have rolled out new fixed-rate loans, in addition to their variable-rate options.

Choosing the best option for you is dependent of a variety of things. First analyze your payment personality type and the forecasted outlook on these interest rates. On a fixed rate option, your payments will be the same throughout the years, on a variable rate term; your payments may grow over time, stay the same, or decrease, depending on the weather in the market.