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Variable of Fixed rate?
September 30, 2016
8:00 pm

So I’m considering consolidating my loans. I’ve been preapproved with SoFi and as most providers, they offer variable or fixed interest rate options. I’m probably going to opt for either a 5 or 7 year pay off and these are their current rates for those periods:

Term Fixed Rate Variable Rate
5 yr 3.5% 2.220%
7 yr 4.0% 2.520%

There have been talks the Fed will be increasing rates forever now, curious if others think it’s worth the gamble to choose variable or go with the fixed.

Thanks in advanced!!

October 2, 2016
10:29 pm
Forum Posts: 351
Member Since:
May 3, 2014
sp_UserOfflineSmall Offline


Great question.

First let me say the Fed doesn’t actually control the variable rate on these loans. Most student loan lenders tie their rates to the LIBOR rate. As LIBOR goes up and down, the rates do as well.

One way to evaluate your decision would be to look at historic LIBOR rates and see what the biggest increase was over a 5 or 7 year period.

Ultimately, it comes down to how you feel about risk. You can pay a little more now and never have to worry about your payments going up, or you can take your chances and hope that interest rates stay low for the next 5 to 7 years.

How big of a disaster would it be if your variable rate jumped up to 5 or 6%?

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