Private Loan Variable Rate Bait-and-Switch

Private loan variable rate bait-and-switch entices with low teaser rates that can balloon to over 14% after graduation, leaving borrowers without federal protections like income-driven repayment. A $40,000 loan at a 4% teaser rate can cost $30,000 more in interest over 10 years if rates spike to 14%, based on Federal Reserve rate trends. This practice is cheaper than the typical federal loan only during the teaser period, but then it becomes 50% more expensive than the average private fixed rate, making it a predatory model.