Fixed rate private student loans offer coeds the opportunity to stay at one interest rate and not fear that they will be forced into a higher interest percentage due to inflation or the crash of the economy. It is important to track the history of interest rates to understand the advantages and disadvantages of these types of contracts. With the world changing so quickly and dramatically, the economy has fluctuated so much that it is hard to determine when percentages are at an all time low. Therefore, when a coed locks into a fixed rate private student loan, he cannot be certain that the percentages in the next month (or sometimes the next day) will not be lower or higher than the one he has locked into. Fixed rate private student loans are good for people who will be paying off their contract over a substantial amount of time. If an applicant feels that there will be continued funding or that the payoff may not happen for a while, it may be wise to stick with a stable percentage.
When choosing between fixed and variable rates, it is important to know what the whole package is. For example, if a coed gets a fixed rate private student loan and later finds out that it would be better to have a variable, what are the penalties that he will pay in order to change the terms? So when an undergraduate is deciding whether to look at a fixed rate private student loan, he should consider all the options and terms. This includes the percentage at which the contract is locked into, the repayment schedule, and penalty charges. If a person is going to keep the contract for three years or more, a fixed rate student loan is probably the best way to go. If the person intends on paying off the balance in under three years, a variable is probably better.
The Bible cautions believers about borrowing money. Proverbs 22:7 says, "The rich ruleth over the poor, and the borrower is servant to the lender." For those who can't afford to get a higher education, fixed rate private student loans may be the answer. However, a person headed for graduation needs to evaluate the future, assessing the salary he will receive in his career field, and comparing that to the indebtedness he is planning to acquire. A person going into a field that pays about $30,000 per year is not wise to accumulate $100,000 worth of debt. The wise borrower checks carefully at the terms, costs, and the monthly payment he will incur. That person will also take his decision to the Lord in prayer.
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