Warren Buffett’s First Choice For Fed Chair Is Ben Bernanke. Second Choice Is A Set Of Steak Knives. Third Choice Is You’re Fired.

Warren Buffett’s First Choice For Fed Chair Is Ben Bernanke. Second Choice Is A Set Of Steak Knives. Third Choice Is You’re Fired.


This is a guest post written by SoFi’s CEO, Mike Cagney.

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There are a lot of factors to take into account when choosing a student loan – differing interest rates, private vs. public, the pros and cons of working with various lenders. Among those choices, we at SoFi have found one of the things that trips up borrowers the most is the choice between fixed rate and variable rate (also known as floating rate) loans.

Variable rate student loans generally offer a lower starting rate than fixed rate loans, but because that number is tied to prevailing interest rates, payments can change over time. If the borrower isn’t able to pay the loan back in a relatively short time period, the benefits of the initial lower rate can be fleeting – particularly with an uncapped loan.

SoFi’s variable rate loan is tied to 1-month LIBOR, which is the interest rate at which banks lend to each other. Like all prevailing rates, LIBOR has been at record low levels since the recession began in late 2008, but as the Fed continues to taper its policy of quantitative easing, interest rates are generally expected to rise. Today LIBOR is at 0.19%, and has ranged from its current low to as high as 5.82% in the past 10 years (see below).

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