Should i refinance my variable rate student loan?

Katelyn Flatley asked a question: Should i refinance my variable rate student loan?
Asked By: Katelyn Flatley
Date created: Fri, Mar 12, 2021 7:11 AM

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Those who are looking for an answer to the question «Should i refinance my variable rate student loan?» often ask the following questions:

💰 Should you refinance student loan with variable rate?

Refinancing can help you pay off student loans faster by decreasing your interest rate. If you plan to aggressively repay your refinanced loan, a variable rate may maximize your potential savings.

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💰 Should i refinance student loans with variable rate?

The only way a borrower would be able to change this interest rate is through refinancing the loan with a private lender or, for federal student loans, consolidating them through the government. Fixed-rate student loans are usually considered the safer option as there is no chance the interest rate will rise.

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💰 Can you refinance my variable rate student private loan?

Private lenders offer variable rate student loans to borrowers looking to take out a new student loan or refinance their existing student debt. Unlike fixed rates, which stay the same over the life of the loan, variable rates fluctuate over time.

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Student loan refinancing helps you choose new loan terms. When you refinance student loans, you can choose a fixed interest or variable interest rate. In contrast, federal student loans only have fixed interest rates. Typically, variable interest rates are lower than fixed interest rates.

Say that you have a $100,000 loan that you want to refinance to a 5-year term. The rates you are being offered are 3.00% fixed or 2.00% variable (these are currently the best rates being offered at Earnest, were I have my loan). Obviously, if rates fall or stay the same, you will be better off choosing the variable rate. What if they rise?

You are thinking about refinancing your student loans—great move! But before you complete your new loan, you’ll need to make a decision: Should you take the fixed-rate or the variable-rate loan? There is no right answer to this question—it depends on your personal budget, your term, and your tolerance for risk when rates change.

Last updated on July 10, 2020 When refinancing student loans, many lawyers stumble on whether to choose the fixed or variable rate. Typically, the variable rate is the better choice. Staring at the loan refinance package offered to me by Earnest, I kept looking back and forth between the variable rate and the fixed rate.

Like other private student loan lenders, student loan refinancing lenders typically offer both fixed and variable-rate loans. You can refinance both private and federal student loans to potentially...

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We've handpicked 22 related questions for you, similar to «Should i refinance my variable rate student loan?» so you can surely find the answer!

Should i refinance my student loans with a variable rate direct?

To share my own story, I actually started out refinancing my loans with a 4.3% fixed rate using SoFi. A few months in, realized that was the wrong play and found that CommonBond could refinance my loans with a variable rate of 1.93%! The rate went up to 2.17% by the time I had paid it off.

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Should i refinance my student loans with a variable rate plan?

Matt Hylland, financial planner with Hylland Capital Management states, “Refinancing student loans can be beneficial in a number of ways, depending on your goals. Borrowers could refinance to lower their interest rate, pay off their loans sooner, or free up monthly cash flow.”

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Should i get fixed or variable rate student loan?

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Fixed vs. Variable Student Loan Interest Rates When you borrow money from any financial institution, whether federal or private, you are expected to pay it back with interest. While the loan terms and conditions may vary widely from one lender to another, the interest rates generally fall under one of two categories, fixed or variable.

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Should i get variable or fixed rate student loan?

So even though you’re assuming a certain level of risk that your rate could go up, you’re also getting a rate that’s lower than the one you’d get on a fixed rate student loan. When variable rate student loans are a smart option. Because a variable rate student loan starts with a lower interest rate, there can be potential for savings. If you’re considering taking out private student loans or refinancing student loans, here are some reasons a variable rate student loan could make sense.

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Should you do fixed or variable student loan rate?

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If you think you'll need more time to repay your loan—10 years or more—opting for a fixed-rate loan makes more sense than a variable-rate loan. With a longer loan term, it's more likely that interest rates will go up, so selecting a fixed-rate loan is the safer choice. You want stable payments.

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Student loan repayment: fixed rate or variable rate?

Fixed rate student loans means that the interest does not change throughout the term of the loan. Variable rate student loans mean the interest will fluctuate based on the rate index or other underlying benchmark. The bad news is that we can’t choose for you on the question of variable vs fixed rate student loans. When it comes to federal student loans, you have no choice; your rate will be fixed.

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Should i choose a variable or fixed rate student loan?

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If you think you’ll need more time to repay your loan—10 years or more—opting for a fixed-rate loan makes more sense than a variable-rate loan. With a longer loan term, it’s more likely that...

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Should i do a fixed or variable rate student loan?

Variable Rate Student Loan Pros and Cons Variable rate loans often look appealing compared with fixed rate loans, because their advertised interest rates tend to be lower. If you had the choice of a 6.50% fixed rate or a 4.75% variable rate, the lower rate might seem to be a great deal.

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Should i get variable or fixed rate student loan 2018?

Variable vs. Fixed Rate Student Loans. Understanding interest rates is important because your rate determines how much you’ll pay on credit cards and other loan products, including student loans. Variable interest rates can increase or decrease over time, while fixed rates stay the same over the life of the loan.

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Should you get a fixed or variable rate student loan?

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Fixed interest rates will help you with better plan financially as the monthly payments will never change. Whereas variable interest rates may increase and you may end up paying higher monthly payments than you originally planned for.

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Should you pick a variable or fixed rate student loan?

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Fixed student loan interest rates are generally a better option than variable rates… If you're unsure which rate to choose, go with fixed; it's the safer option. If you're comfortable taking a risk to potentially save on interest — and will be able to pay off your student loan fast — consider a variable rate.

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Is sallie mae student loan variable rate?

Fixed-Rate Loan @ 9.0% Monthly Payment Variable-Rate Loan Variable Rate @ LIBOR + 3.0%: Changing every 12 months Year 1 $126.68 for 120 months $125.22 LIBOR = 5.73% + 3.0% = 8.73% Year 2 $123.45 LIBOR = 5.37% + 3.0% = 8.37% Year 3 $129.08 LIBOR = 6.63% + 3.0% = 9.63% Year 4 $117.11 LIBOR = 3.58% + 3.0% = 6.58%

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What is a variable rate student loan?

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Variable-Rate (or Floating-Rate) Student Loans. As mentioned above, all federal student loans have fixed interest rates. So as of this writing, borrowers will only have the option to choose a variable rate student loan when borrowing from a private lender. While variable rate student loans typically have a lower starting interest rate, they are also riskier than fixed-interest loans.

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What is a variable student loan rate?

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Variable student loan rates are a gamble

Variable rates are subject to change throughout the life of the loan. Student loan lenders typically set variable rates based on an economic indicator known as the London Interbank Offered Rate, or Libor. Lenders determine variable rates by adding the Libor rate to a base rate.

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What is the variable student loan rate?

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Variable rate student loans are defined mainly by how their interest rates are set. Remember, only private student loans have variable rates. All federal student loans have a fixed rate. A variable rate means that the interest rate you are charged on the debt's balance can (and often will) change over time.

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What is variable interest rate student loan?

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Variable interest rates are only available on private student loans and refinancing loans. With variable-rate loans, the interest rate on your loan can change—perhaps monthly. They often start with lower interest rates than fixed-rate loans, but the interest rate can increase based on the index the lender uses.

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Can you refinance both fixed and variable rate student loans?

  • Like other private student loan lenders, student loan refinancing lenders typically offer both fixed and variable-rate loans. You can refinance both private and federal student loans to potentially lower your interest rate, reduce your monthly payment and save money over time.

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Is it smart to refinance student loans variable interest rate?

When variable rate student loans are a smart option. Because a variable rate student loan starts with a lower interest rate, there can be potential for savings. If you’re considering taking out private student loans or refinancing student loans, here are some reasons a variable rate student loan could make sense.

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Should i do a variable rate loan?

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On the other hand, if interest rates are on the decline, then it would be better to have a variable rate loan. As interest rates fall, so will the interest rate on your loan.

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Should you do a variable rate loan?

Riskin says, “Student loans with variable interest rates tend to look more attractive on the surface, as they are often advertised as being more affordable than fixed rate loans. But the rate also has the ability to change every year (or month) and may eventually move higher than the stated fixed rate.” So, how do you determine which one might be finest for you? 4 components to think about when selecting a set or variable rate of interest

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Should i do a fixed or variable rate student loan refinancing?

Choosing between a fixed and variable rate when refinancing your student loans depends on a few factors: Your tolerance for risk -- A fixed-rate loan is clearly the safer option, whereas a ...

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Should i refinance my student loans variable or fixed?

variable vs fixed rate student loans adjustable rate mortgage

Refinancing can help you pay off student loans faster by decreasing your interest rate. If you plan to aggressively repay your refinanced loan, a variable rate may maximize your potential savings… That means you may not pay much more with a fixed rate, and you'll be protected if your repayment plans change.

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