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Fixed vs. Variable Interest Rates — and How They Impact Your Student Loan

When deciding whether or not to accept a loan offer, two important numbers you should look at are interest rate and APR. However, there’s another factor whose impact on these numbers you’ll also want to take into account: Whether the interest rate is variable or fixed. You may have seen that our rates here at Climb are fixed. But what does this mean, and how might it affect your loan? Below, we have a run-down of the differences and significance of variable vs. fixed interest rates.

Fixed vs. Variable Interest Rates

What’s a variable interest rate?

A variable interest rate — also sometimes called a floating interest rate — can vary over time from what you’re first given. Example: If you receive a 7% variable interest rate at the beginning of your loan, it can rise or lower throughout your loan term according to federal interest rates or LIBOR (see below).

What does that mean for you?

That depends on the strength of the market when you initially get your loan. A common measure for what your rate will be is the 1-month London Interbank Offered Rate (LIBOR), which is the rate banks charge each other to borrow money. When the market is down, your interest rate will also go down. But when the market is on the rise and federal interest rates increase (as they are currently), your rates will also increase accordingly. So by accepting a variable interest rate loan, your monthly payment could increase unexpectedly along with higher rates. 

Fixed vs. Variable Interest Rates

What’s a fixed interest rate?

When an interest rate is fixed, it won’t change, no matter what the market looks like. If you’re given a 7% interest rate, it will remain at 7% for the life of your loan. When you receive a Climb loan, the interest rate you’re offered will always be fixed at what you agreed upon when signing.

What does that mean for you?

When your rate is fixed, you can be sure it will remain consistent — and while it won’t get lower, you also won’t have to worry about it increasing. So, you can be certain of the amount you’ll pay in interest on your loan (as long as you make the minimum payment each month). That’s why Climb chose to keep all of our interest rates fixed. We don’t want our borrowers to have a monthly bill that’s larger than what they originally anticipated.

Of course, if you have further questions about our rates (or fixed vs. variable interest rates in general), the Climb team is here to help! You can reach out to our team through live chat at climbcredit.com or email at hello@climbcredit.com. We’re available Monday–Friday, 10am–8pm ET. We look forward to hearing from you!

Curious what interest rates you can get with Climb Credit? Submit an application today to check your rates with no impact on your credit score!*

Update (September 1, 2018): Since the publication of this post, 1-month LIBOR has increased from 1.88% to 2.08%. Which means that, if you start with a 7% interest rate, that rate will have increased to 7.2% in only four months.

*Climb performs a soft credit pull upon application submission, which does not impact credit score. When a loan is funded, a hard credit pull is performed, which may impact credit score.

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What to Expect: Realistic Outcomes

Climb’s Comprehensive Access Solution can offer a strategic balance of increased enrollments and upfront cashflows compared to traditional lenders. While no financing solution guarantees 100% collection, our data-driven approach maximizes both upfront cash and long-term repayment rates.

Typical Partner Results:

  • 15-30% of students qualify for Climb Loans with upfront tuition delivered to the school shortly after course start
  • 45-60% of students qualify for 0% APR* payment plans
  • Enrollment increases of 20%+ reported by partner schools**

**Results vary by school and student demographics. This represents performance reported by individual school partners and should not be considered a guarantee of your specific outcomes.

The bottom line: CAS is designed to maximize your net tuition recovery while eliminating the administrative headaches of student financing.

Maximizing Your Results

Pro Tip: Schools that require student deposits and set up automatic payments during enrollment see significantly better repayment performance across all financing options. These simple steps can meaningfully improve your outcomes.

FAQs

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

Students are placed into funding brackets (Elite, Standard, Enhanced) based on our AI assessment. Higher-credit students generate higher upfront payments to your school, while students with limited credit are seamlessly directed to our 0% Payment Plan.

These brackets are established using data from over $1 billion in career training loan originations and may be adjusted periodically based on updated repayment trends.

Important note: Regardless of which bracket a student falls into, they are considered fully paid by your school once funded. The student’s repayment obligation exists exclusively between Climb and the student.

Elite Access not available for Computer Science programs. Upfront percentages vary by industry and loan terms.

Once Climb disburses upfront funding for a student loan, that student is considered fully paid by your school. You will not receive any additional payments for that student—the single upfront payment is complete and final.

From that point forward, the student’s repayment obligation exists exclusively between Climb and the student. Your school has zero liability if the student defaults, and you keep the full upfront payment regardless of the student’s future payment performance.

They’re automatically offered our 0% Interest Payment Plan, ensuring no student is turned away while maintaining steady monthly cash flow for your school.

Higher-credit students generate larger upfront payments (75-100% of tuition), while students with limited credit use our 0% APR* Payment Plan for consistent monthly revenue. Both options are risk-free for your school

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Typically, within 5-10 business days after your partnership agreement is signed.

Comprehensive onboarding webinar, continuous partner support via AI-assisted chat and live email—and real-time borrower assistance with our live-chat-available student success team.

No. Climb fully manages the administrative responsibilities—your team simply monitors your school’s performance via our intuitive School Portal.

Your school is fully protected either way. For Climb Loans, you keep the entire upfront payment with zero liability. For Payment Plans, you only receive what students actually pay, with no risk to your school.