Financing your college education isn’t always as easy as it seems. After considering all your options and realizing that you or your parents couldn’t cover the entire cost of your expenses, you need to turn to alternatives.

For the duration of your degree, the average cost can amount to a whopping $99, 417. Most people struggle to fill in the gaps in their personal funds, turning to student loans as a viable alternative. It’s no wonder that almost 45 million Americans are student loan borrowers today. This makes up around one-third of adults under 30 years of age who have an outstanding debt that sums up to an astounding $1.5 trillion in federal and $119 billion in private student loans.

Most student loan repayment plans span over a period of 10–30 years, which is why it’s important to determine how to pay off your student loan as efficiently as possible. With decades to repay the loans accrued during your college years, it’s no surprise that many people spend most of their young adult lives doing so.

Luckily, there’s a lot of flexibility when it comes to selecting student loan terms before you dive in. From interest rates to repayment periods, your approach toward these crucial decisions will affect the cost of your debt in later years.

Choosing An Interest Rate

The interest rate of your loan doesn’t just impact the total cost of your debt, but how much you’ll have to pay monthly too. Making the right decision at the time of applying for your loan will have a considerable impact on your finances later in life. That’s why you should think of all the possibilities before you make the final decision.

Depending on your lender, you might be given a choice between a fixed or variable interest rate. This flexibility makes student loan borrowing a viable option for many, making their college dreams a reality while enabling them to repay their loans after they get a job post-graduation.

As with everything in life, both types of interest rates come with their pros and cons. As a serious borrower, you need to carefully choose between them while keeping your long-term and short-term finances in mind.

Fixed-Rate Student Loans

Throughout the duration of your loan repayment period, fixed-rate student loans maintain the same interest rate. The rate itself may depend on other factors, but this type of interest rate guarantees a predictable monthly payment that doesn’t change over the loan’s lifespan.

It’s important to remember your lender’s policy on interest rates before you head into a loan agreement. While private borrowers allow you flexibility in choosing the type of interest rates, federal loans do not.

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Since 2006, all federal loans have a fixed interest rate. While the rate itself is determined by Congress’s annual reevaluation, your existing loan’s interest rate will not be affected. Federal loans take a one-size-fits-all approach to loans and offer similar rates to people in the same academic year.


For anyone who enjoys certainty in life, fixed-rate loans are the way to go. This long-term commitment is ideal for anyone who plans to pay off their loans over several years—with many going up to 25 or 30 years. Knowing the interest rate won’t fluctuate over the decades is comforting for someone who’s in it for the long-haul.


As the name suggests, fixed interest student loans aren’t liable to change during the span of your loan. This can be detrimental if you stand to benefit from interest savings owing to certain circumstances—such as the current near-zero interest rate during the COVID-19 crisis.

The only way to change your fixed interest rate is by refinancing your student loans.


If you’re unsure about your future earnings, a fixed interest rate is ideal for you. By knowing how much you’ll have to pay in monthly installments, it’ll be easier to set a budget. Since the amount due won’t change, you can enjoy some peace of mind as you move forward with your life.

Variable Rate Student Loans

This type of interest rate is only available when you’re borrowing from a private lender. The high-risk, high-reward situation of variable rate student loans makes it a viable choice for people who are interested in saving money on their loans.

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During the life of your loan, the interest rate is liable to change due to the country’s current economic conditions. Timing is important when taking on variable rate loans, with incredible potential savings awaiting you if the economic conditions remain fairly stable.

Faster repayment

This type of interest rate is ideal if you plan on paying off your loans quickly. For people with a high, stable income that allows them to handle monthly payments even if they increase, the fluctuating rate will allow them to pay off larger amounts during times of low interest.


Unlike fixed-rate interest, variable rates offer flexibility when applying for your loan. Private lending is often very competitive, allowing people to review loan plans from various lenders before they make the final decision. Go through what each lender has to offer and choose one whose terms suit your needs best.

Good credit score

When you’re applying for student loans, you can take advantage of a good credit score to secure low initial interest rates. The higher your score, the more reliable you appear to lenders and, thus, a low-risk borrower. Starting with a low-interest rate owing to your credit score ensures you can benefit from even lower-than-average rates as they fluctuate.

Getting a co-signer or having a very high credit score will let you enjoy interest rates that are considerably lower than even subsidized federal loan rates!

Making The Right Choice

Young asian woman working using tablet checking social media and drinking coffee while relax on desk in living room at home. Free Photo The ideal student loan repayment plan depends on your unique needs, circumstances, and foreseeable future goals. There’s a lot at stake when you’re choosing the plan that’s best for you and the risk of defaulting is ever-present.

Just because you’ve picked the plan that seems best to you right now doesn’t mean it’ll be ideal with your future circumstances too. Luckily, you don’t have to stay committed to your loan’s terms for its entire lifespan. Refinancing your student loans with ELFI offers viable opportunities to take advantage of lower interest rates and more suitable repayment timelines.

About ELFI

Education Loan Finance is one of the leading student loans and refinancing providers across America and Puerto Rico. The company has helped countless students receive student loans or refinance their existing loans with low-interest rates and more favorable terms.

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