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Private Loan Interest Rate Index Changes

What is changing?

The benchmark used to calculate the variable interest rate for private loans will change from the London Inter-Bank Offered Rate (LIBOR), as it is set to sunset, to the Secured Overnight Financing Rate (SOFR) effective October 1, 2023.

Over the past several years, the LIBOR benchmark has become less reliable and more prone to issues. As a result, experts like the Alternative Reference Rates Committee identified several alternative methods to calculate interest rates. Since then, regulators and Congress have laid out a plan to transition away from LIBOR. This transition will affect loan agreements across all sectors of business that utilize LIBOR – not just private education loans.

Following the direction of Congress, most LIBOR-based loans are transitioning to SOFR as it is a comparable benchmark to LIBOR. Since this is a shift to a SOFR-Based Spread-Adjusted Index, it is not considered a refinance of a private loan; it is merely a change to the benchmark used to determine your variable interest rate. This will happen automatically for borrowers with private loans, and you should not notice a difference in the way we service your loan. The new rate does not impact any other terms, conditions, or benefits associated with your private loan(s).

This change impacts millions of borrowers like you, with all lenders across the country.

What happens next?

We will notify you when we make the change to SOFR.

You will receive a formal notification of this change when your new rate is set effective October 1, 2023. We will also send several reminders in advance of the effective date, to ensure you have the information you need.

What do I need to do?

You do not need to do anything today related to this change.

We will handle the transition for you, just as the entire banking and lending industry is doing for all of their customers. We will send you updates about this topic so you can understand the scope and timing of the rate change. You can also check our website to learn more.

Will my monthly payment change?

On average, your new interest rate should be comparable to the old rate. That means you will generally pay the same amount that you would have before the change.

As a variable rate loan, your monthly payment amount has changed on a regular schedule since your loan was disbursed. It will continue to change on a comparable schedule according to the terms and conditions of your loan. Only the benchmark used to calculate the variable interest rate will change.

We will calculate your interest rate using the SOFR-Based Spread-Adjusted benchmark index plus whatever margin you originally agreed to when taking out the loan.

Will this impact my other student loans?

Federal (FFELP and Direct) student loans are not impacted by this change. FFELP and Direct student loans have interest rates set by law, so no update is needed. Fixed rate private loans or variable rate private loans that utilize a benchmark other than LIBOR will not be affected.

Other private education loans may be impacted. If your loans used LIBOR, they will change to a new benchmark index.

Where can I go to see the new SOFR rate?

The Federal Reserve Bank of New York publishes the SOFR rate that is used to create the SOFR-Based Spread-Adjusted Index.

Can I opt-out or are there other options?

No, you cannot opt out of this change.

LIBOR will not be available after June 30, 2023, and Congress has provided guidance on how loan holders/services can adjust the benchmark for your loan. This ensures that both you and the loan holder/servicer have a predictable and stable way to calculate your rate.

Could this happen again?

Federal regulators and Congress have taken steps to reduce the chances of the benchmark changing again. Although there is always the possibility of a similar change in the future, you should not experience any disruptions.


In 2022, Congress passed a law that made SOFR the preferred alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight—and is comparable to LIBOR. It is collateralized (made secure) by U.S. Treasury securities in the financial market. To adjust for small differences between LIBOR and SOFR, Congress also legislated a spread adjustment to make them even more comparable; that new benchmark is known as the SOFR-Based Spread-Adjusted Index.

How does SOFR differ from LIBOR?

SOFR has several characteristics that make it much safer and more stable than LIBOR. It is:
• Based on an active underlying market with a diverse set of borrowers and lenders
• Based entirely on transactions (not estimates)
• Produced in compliance with international best practices
• Included in multiple market segments, to ensure robust transaction volumes in a wide range of market conditions