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How are variable rates for refinanced student loans calculated?

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  • How are variable rates for refinanced student loans calculated?

    Can the variable rates offered by a student loan refinance be changed arbitrarily or on the whim of the company holding the loan? Or are they tied to specific variables?

    I just requested quotes from the major players and the offers were all over the map, ranging 1.99 - 4.5% for variable 5 year loans, who each confirmed that is the best rate anyone can qualify for currently. This is interesting given several recent posts from April stating those with pre-existing variable loans have seen their rates drop to the 0.6 - 1.2% range from starting 1.7 - 3.5% range. They declined to comment on the reason for such a discrepancy other than to state, "several factors are taken into account beyond the fed rate".

    So, are those of us who didn't have a variable loan when the fed slashed rates repeatedly SOL? 1.99% isn't bad, but under 1% looks tasty.

  • #2
    Great question that I was asking myself recently. Your interest rate is based on a benchmark + set margin that's described in your loan agreement. While the benchmarks have been decreasing (mine is 1 month libor), it sounds like the margins being offered are increasing.