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Current Fed Fund Rate and Student Loan Refinancing - Variable vs Fixed

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  • Current Fed Fund Rate and Student Loan Refinancing - Variable vs Fixed

    I'm a 3rd year medicine resident in California, about to graduate in a few months trying to figure out what is going to be the best way to refinance my medical school loans. I've been looking at some of the companies like Sofi, Earnest, Laurel Road.

    The big question I have now is when is the best time to refinance (now or wait a few months)? With the way the stock market is right now due to the coronavirus, and the Fed cutting interest rates recently, I've heard that this is only the beginning and likely there will be more drops in interest rates by the Fed in the upcoming months. I’ve been left wondering if rates drop low enough is it possible to refinance at such a low fixed rate that it is comparable to what you would normally get with variable rates. Therefore when rates inevitably go back up I’ll still have my fixed low rate. Any general or specific thoughts on this would be appreciated. Thanks.

  • #2
    Low enough....

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    • #3
      FFR is 1%.
      They could cut to -0.25% (placing a negative rate on deposits).
      Interest rate on other debt = FFR + risk premium + term premium.
      FFR may reduce but risk and term premiums may increase for that particular debt vehicle.
      My guess: in a recession risk premium may
      increase, term premium reduce and FFR may go to zero.

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      • #4
        I refinanced with Earnest last month with a variable rate. With 122K left for my loans. Just checked and my variable rate this month is 1.16%

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        • #5
          I just refinanced into a 5 yr variable with Splash at 1.29%

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          • #6
            My old variable refi is 1.8% so I havent changed anything.

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            • #7
              I just refinanced my Laurel Road to 1.74% 5-year variable, down from 3.795%. I am a bit annoyed because their rate offer went as low as 1.04% while they were dragging their butts to finalize my paperwork.

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              • #8
                Per today's WCI letter... Splash is doing 2.88% fixed for those who qualify.

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                • #9
                  I am applying today to get my rate down a bit - offered 3.0 fixed and 1.99 variable (5 year for both) from Laurel Road. Seems like most opting for variable, would anyone argue for the fixed? I was previously planning to pay off within the next year, but lots of things can change as evidence by COVID. I have about 200K remaining, down from about 300K initially. I was actually leaning toward fixed...

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                  • #10
                    Originally posted by SEC Doc View Post
                    I am applying today to get my rate down a bit - offered 3.0 fixed and 1.99 variable (5 year for both) from Laurel Road. Seems like most opting for variable, would anyone argue for the fixed? I was previously planning to pay off within the next year, but lots of things can change as evidence by COVID. I have about 200K remaining, down from about 300K initially. I was actually leaning toward fixed...
                    I just refinanced $166k with Laurel Road to 1.74% 5 year variable. I think the fixed was 1.25 or so higher for 5 year. After getting a rate that low, I figured the variable was the way to go, and I can make this debt less of a priority with a small rate.

                    Don't forget to get your discounts with Laurel Road (0.25% each for AMA discount and autopay). I wish my subspecialty organization would broker a deal with LR because I'd rather not give AMA any money.

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                    • #11
                      Originally posted by SerrateAndDominate View Post

                      I just refinanced $166k with Laurel Road to 1.74% 5 year variable. I think the fixed was 1.25 or so higher for 5 year. After getting a rate that low, I figured the variable was the way to go, and I can make this debt less of a priority with a small rate.

                      Don't forget to get your discounts with Laurel Road (0.25% each for AMA discount and autopay). I wish my subspecialty organization would broker a deal with LR because I'd rather not give AMA any money.
                      I would not join the AMA if they paid me too.

                      Well maybe if it was enough and I did not get too many emails.

                      And I better get a tote bag.

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                      • #12
                        I only did it a year ago because the membership was $60, and that discount more than covered that. As far as sell outs go, that ain't too bad.

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                        • #13
                          I refinanced a month ago with Earnest from 4.85% fixed 7 years to 1.85% variable 5 years. Checked today, 1.16%. Unbelievable. I’ll carry that low interested debt for awhile.

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                          • #14
                            I submitted applications for my wife. ~$90k remaining. I believe Laurel Road was quoting 5 year fixed at 3% and Splash 5 year fixed at 2.88%. We’ll miss out on the bonuses because we’ve used Laurel Road before, Splash requires 100k for the bonuses.

                            Has anyone got them to budge on the bonuses or match rates?

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                            • #15
                              Originally posted by SEC Doc View Post
                              I am applying today to get my rate down a bit - offered 3.0 fixed and 1.99 variable (5 year for both) from Laurel Road. Seems like most opting for variable, would anyone argue for the fixed? I was previously planning to pay off within the next year, but lots of things can change as evidence by COVID. I have about 200K remaining, down from about 300K initially. I was actually leaning toward fixed...
                              If you were planning on paying them off in the next year then paying them off in 5 years should be easy. I'd go variable and continue to pay quickly. I've yet to meet someone who regretted paying off their student loans.

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