Wells Fargo and U.S. Bank have recently launched a new type of private student loan. The fixed rate student loan is designed to attract more consumers, but they do have a range of pros and cons which should be considered before students sign up.

The private loans market is continuing to lose ground as the federal government offers subsidized fixed rate loans with low rates of 3.4 percent. This has forced private lenders to rethink their products. Wells Fargo and U.S. Bank are two banks which are determined to offer more options in an attempt to hold on to private loan customers.

Wells Fargo has recently announced fixed rate options for many of their existing student or education loan products. These fixed rates can vary from 7.75 percent up to 14.5 percent, largely dependent on the applicant’s personal circumstances and credit history.

The better the applicant’s credit history is, the lower the interest rate offered on their fixed rate loan. The bank also offers variable rate loans which carry rates of between 3.5 percent and 12.74 percent. U.S. Bank are offering their fixed rate student loans at 7.99 percent subject to credit approval. They too offer variable rate loans with options ranging between 3.45 percent and 10.95 percent.

However, choosing a student loan is not only about the interest rate. There are other aspects which must also be taken into consideration. Private loans do carry some pro points. First of all, private loans typically carry variable interest rates which can fall or rise with the benchmark prime rate.

That means that these new fixed rate student loans eliminate some risk for consumers. Student borrowers can relax, safe in the knowledge that the monthly repayments will remain the same regardless of market fluctuations. With experts predicting increasing rates in coming years, a fixed rate is a much safer bet.

Like most financial options, there are also downsides to fixed rate student loans. The main con is that private loans, both fixed and variable rate, can be a serious risk. Private loans usually require a cosigner if the borrower has less than perfect credit. Considering that most student loan applicants will be approximately 18 years old, it is likely not many have a good enough credit rating.

This means that they require a family member to cosign and they must take responsibility if the payments are not met. In addition to this, the law does not require private student loans to be discharged in the event of the borrower’s death. This means that the loan is passed to either a cosigner or the surviving family to pay off.