The only fixed rate student loans available are federal loans, and even those can change based on federal law. However, if you want to lock in your interest rate, you can do so after you finish school.

Federal student loans offer a more stable rate; even though changing laws can change the interest rate on these loans, it is not going to happen from one day to the next, which is a possibility with private loans. Private loans should only be considered when federal loans and financial aid do not cover the costs of your education.

Education costs are rising faster than federal student loan amounts, so many students are finding themselves in a situation where they need extra funding. Lenders take advantage of this situation and stepping in to fill the gap.

If you have excellent credit, you are eligible for loans which offer Prime interest rates. Good credit takes time to build up, however, and if you’re a young student, if you don’t have bad credit, you probably have no credit or a very short credit history. This doesn’t make it impossible to get a loan, but you may need a cosigner or be charged higher fees and interest rates.

This puts you in an even more precarious situation than other sub-prime borrowers, because unless bankruptcy laws change, you will not be able to have your student loan debt excused by declaring bankruptcy unless you have extreme economic difficulties and, according to current precedence, absolutely no chance of future improvement.

You do have the option of consolidating student loan debts. This will give you the chance to freeze the interest rate for the life of the loan. The downside of this is that, while you will also pay less per month, you will be paying off your debt over a longer period of time and in the end, it will cost more. Having a fixed interest rate and lower payments now may be worth the future increase in total cost.

Consolidating student loan debts also allows you different payment options. You can pay interest-only for up to four years with some lenders, allowing you to get a head-start on a career, or you can take advantage of a graduated repayment plan to start paying off the debt now. You can switch payment options, so if you ever suffer financial difficulties, you can switch to an income-based plan. And you can always make early payments on the principle.

Students wishing to convert their private student loans into fixed rate student loans should consider consolidation. It offers a locked interest rate but allows borrowers the chance to use varying payment plans to make student loan payment easier.

By: Adam Hefner