Variable Rate Refinance Private Student Loan Interest is 0%–1%

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I knew that borrowers with federal student loans were benefitting from temporary interest-free loans during the pandemic, but I was quite surprised that some who had chosen variable rate refinancing via private companies are also benefitting from 0% interest or close to it.

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These great interest rates were not limited to one company; the borrowers had refinanced using five different refinancers. One thing they all had in common was a variable interest rate and a 0.25% autopay discount. Let’s dig into how these borrowers were able to score such a low interest rate.

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Fixed Rate Versus Variable Rate Refinancing

When you refinance student loans with most companies, you will be given the option of a fixed-rate or variable-rate loan. Which should you choose? There are a number of factors and some guesswork involved, but there are a few key considerations.

The higher your loan balance, the longer it will take you to pay them off. Owing multiple six-figures would tend to favor a fixed rate. There will be no uncertainty in your interest rate over the entire payback period.

If you have a lower balance that you think you could pay off in five years or less, you might take a chance on a variable rate, which will usually be lower than the fixed rate offer.

The larger the gap between your earnings and your spending, the better able you will be to direct more money toward your student loans if and when you want to focus more on paying them down.

If you expect money to be tight after meeting your retirement savings goals and monthly student loan payment, a fixed rate may be the better option. Conversely, if you’re easily able to max out your retirement accounts and meet your student loan obligation with money to spare, you would be in a position to pay loans down more quickly if the rate were to rise.

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