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I have about $21,000 in variable rate student loans. About half are 30-day SOFR + 1.5%, the other half + SOFR 2.05%. In total they are at 6.64% and 7.19% right now (based on SOFR on the 25th of last month). Both ~4 years of payments remaining.
With rates falling, at first it seemed like a no-brainer to try to refinance. But looking into a fixed rate refinance, I'm wasn't so sure. Soft checks are looking like ~4.35% or so fixed. Looking at the forward SOFR futures, it seems like people expect the 30-day SOFR to fall to around 2.86% in about a year. Which would put my existing variable rates at about 3.25% and 4.90%. Seems like a crapshoot on whether it would make sense or not compared to my current variable rates.
I then realized I should probably be looking at refi to another variable rate rather than fixed. Soft checks are looking like 5.54% right now. That is also based on SOFR, so I presume the adder must be lower than in my current loans. I initially got these loans around 2020/2021, back when the variable rate was like 1.6% total (formerly based on LIBOR at near-zero). So, at first, I was thinking it would be pointless to refi--how could a refi beat that--but as I think about this more, that 5.54% variable I noted above must have a smaller adder on top of SOFR, and therefore should be expected to outperform my own variable rate regardless of how SOFR swings.
Any suggestions? Am I thinking about this correctly?
Thanks in advance.
)I have about $21,000 in variable rate student loans. About half are 30-day SOFR + 1.5%, the other half + SOFR 2.05%. In total they are at 6.64% and 7.19% right now (based on SOFR on the 25th of last month). Both ~4 years of payments remaining.
With rates falling, at first it seemed like a no-brainer to try to refinance. But looking into a fixed rate refinance, I'm wasn't so sure. Soft checks are looking like ~4.35% or so fixed. Looking at the forward SOFR futures, it seems like people expect the 30-day SOFR to fall to around 2.86% in about a year. Which would put my existing variable rates at about 3.25% and 4.90%. Seems like a crapshoot on whether it would make sense or not compared to my current variable rates.
I then realized I should probably be looking at refi to another variable rate rather than fixed. Soft checks are looking like 5.54% right now. That is also based on SOFR, so I presume the adder must be lower than in my current loans. I initially got these loans around 2020/2021, back when the variable rate was like 1.6% total (formerly based on LIBOR at near-zero). So, at first, I was thinking it would be pointless to refi--how could a refi beat that--but as I think about this more, that 5.54% variable I noted above must have a smaller adder on top of SOFR, and therefore should be expected to outperform my own variable rate regardless of how SOFR swings.
Any suggestions? Am I thinking about this correctly?
Thanks in advance.
Statistics: Posted by tengri — Wed Sep 25, 2024 6:21 pm — Replies 0 — Views 33