Student Loan Refinance Question

[bmddds]

Wanted to get a quick opinion or two:

About to refinance a student loan I have that is about $60,000 with 4.5% interest rate.  Want to pay it off in 3-5 years and have been looking at 5 year variable with sofi starting at 2.58% (capped at 9%) or a fixed 3.15% refinance loan with Lendkey.  Initially I was variable all the way as the last few years I have seen the math but with federal interest rates raising as much as they have in 2017 and with the expectation they will continue to rise in 2018 I'm wondering if at this point in time I should just take the 3.15% even if I plan on paying it off in 3 years.

 

Obviously I know the money amount isn't much here in the long run, just wanted to get some opinions if anyone thinks at this point in time the fixed rate at 3.15% is better than 2.58% since LIBOR 1 month rates are expected to go up a few times this year.

[Peds]

i would take the variable. you would need a lot of jumps to get from 2.6 -> 3.1, so that entire time you are ahead.

also think of it as motivation to keep the gas pedal down and get rid of them!

dont forget, you can always refinance again if the rates pass what you like/qualify for.

[cgossage]

bmddds wrote:

Wanted to get a quick opinion or two:

About to refinance a student loan I have that is about $60,000 with 4.5% interest rate.  Want to pay it off in 3-5 years and have been looking at 5 year variable with sofi starting at 2.58% (capped at 9%) or a fixed 3.15% refinance loan with Lendkey.  Initially I was variable all the way as the last few years I have seen the math but with federal interest rates raising as much as they have in 2017 and with the expectation they will continue to rise in 2018 I’m wondering if at this point in time I should just take the 3.15% even if I plan on paying it off in 3 years.

 

Obviously I know the money amount isn’t much here in the long run, just wanted to get some opinions if anyone thinks at this point in time the fixed rate at 3.15% is better than 2.58% since LIBOR 1 month rates are expected to go up a few times this year.

Click to expand...

I would do the fixed.  If the Fed bumps the rate twice you are basically even.  Pimco is expecting the Fed to bump rates 3 times.  I know we have all been expecting rate increases for awhile, but I think we will finally start seeing it now that unemployment is steady at 4.1% and corporations continue to earn more due to the tax bill.  This would imply some real wage increases and general overheating of the market.

[noobnoob]

Peds wrote:

i would take the variable. you would need a lot of jumps to get from 2.6 -> 3.1, so that entire time you are ahead.

also think of it as motivation to keep the gas pedal down and get rid of them!

dont forget, you can always refinance again if the rates pass what you like/qualify for.

Click to expand...

That's good advice. Go for the low variable rate now, and if they creep up, refinance again and you can decide at that time if you would rather do fixed.

[Dicast]

Check my math but the difference the first year is about $340 between fixed and variable. The second year it will be less just with a lower balance to start. So for the total life of the loan you aren’t talking great sums of money. If you feel better on the fixed, long term it really wont matter.