If you must get a student loan, find a fixed rate

A postcard from student loan matchmaker MyRichUncle.com recently showed up in my mailbox, addressed to my brother -- who graduated in the spring of 2008.

MyRichUncle.com announced that it had stopped making loans late last year, making the postcard even more curious. Or perhaps less curious. Is it really shocking that a student lender company who sent marketing material to people who had already graduated after it stopped making loans ended up going out of business?

But anyway, there's still something of value to be gleaned from the mailing. The postcard brags that "Our conflict-free private loans start as low as 8.79% APR. * Ah, the good old *"

Apparently the phrase The good old was put in place to remind my brother that "The interest rate is variable and may increase or decrease based on the 3-Month LIBOR."

The 3-Month LIBOR? What percentage of college students even know what that is? And what kind of rich uncle lends money based on the 3-Month Libor? Uncle Ebenezer Scrooge?

If you or someone you know is shopping for student loans right now, it's extremely important to avoid the variable rate variety. Interest rates are at record lows and most experts agree that they will spike upward quite a bit because of inflationary pressures. Just as homebuyers are almost universally opting for fixed-rate mortgages right now, so too should student borrowers. Best of all, you'll know what your monthly payments will be when you graduate. With variable-rate loans, you're really just guessing.
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