Update: Fed Raises Rate, but Refinancing May Still be Worth It

The Federal Reserve today announced its third increase in 15 months to the benchmark federal funds rate. The upshot is that if you were thinking of refinancing your student loans last week, your interest rate will now be roughly 0.25% higher. However, there’s no use crying over spilled basis points. With the Fed signaling its intent to potentially raise rates five more times by 2019 (i.e., another 1.25% in aggregate), student loan borrowers should still consider, first, whether the tradeoffs of refinancing make sense individually, and second, which student loan refinancer will get them the best deal.

Here are some quick do’s and don’t’s in light of today’s right increase: 

  • DON’T let the perfect be the enemy of the good by dwelling on the fact that if refinancing yesterday could have saved you 3.5%, today it will on save you 3.25%. You can’t change that fact, and a 3.25% interest rate reduction may still be well worth it given your individual situation.
  • DO consult our refinancing calculator to see how much you can save by refinancing your loans so you have a concrete number to weigh against the potential downsides of refinancing (e.g., the loss of Government Benefits).
  • DO bear in mind that some refinance providers don’t update rates mid-day or may have already priced in the expected increase, so DO submit any outstanding applications and see if you can still grab yesterday’s rate.
  • And if you just got burned by the rate increase because you didn’t get your application in on time, DON’T put off refinancing until the eleventh hour, but rather DO chalk it up as a learning experience and use it as motivation to finish your application and lock in a lower refinanced rate pronto.

Questions? Comments? Concerns? Brickbats? Shoot us an email or leave a comment!


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