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variable vs fixed interest student loan refinance?
I looking for a 10 year student loan refinance for grad school loans at $323k. I currently have a fixed rate of 10 yrs at 3.98% with citizens one, I checked my rate with earnest and they offer 3.75% fixed and 3.42% variable. I was wandering if variable is worth the risk and the extra 0.33% savings during COVID pandemic time. Or is it not worth the risk since its only worth it if savings greater than 1%? i do believe that I will get it paid in 10 years at least 7 years minimum. I don't know if rates will go up significantly this decade. Any input would help.
at 3.75%: monthly payment $3,232, interest monthly $1,009 with Principal $2222
total cost: $387,837 total interest: $64,837
at 3.42%: monthly payment $3,181, interest monthly $920 with principal $2,261
total cost: $381,830 total interest: $58,830
4 Answers
- ?Lv 77 months ago
imo interest rates will remain very low for years. Go with the variable. Even if the variable goes above the fixed rate in the future you will have saved enougn to compensate for the extra charge. [But, as you have shown, the difference is only about $600 a year.]
- BillLv 77 months ago
NO! If your loan is currently fixed at 3.98% you will be better off sticking with it than going to a Variable one that can increase over the course of the loan.
- Anonymous7 months ago
The thought of that much debt just blows my mind. SMH.
I would not borrow a dime when I was young, I worked my way before dropping out for a half way decent full time job.
- Anonymous7 months ago
Holy crap! I hope your post-grad work earns you a whopping salary because your student debt is nuts-o.
Extra .33% (temporary) savings would not interest me at all. Interest rates are at historic lows and have nowhere to go but up. For all you know they could be at 7-8% in five years. People used to have mortgage rates of over 10%. My first mortgage was 8.5%.
Take the fixed and lock in that rate. It really is a no-brainer.
