Fixed or variable rate when refinancing

A fixed rate never changes. A variable rate starts lower and moves with a market index, so your payment can rise. The CFPB puts it simply: with a variable rate, your payments may not be the same from month to month.

The choice comes down to one question: how long will you owe the money? The shorter the answer, the better a variable rate looks.

Before either one, remember what refinancing does. It turns federal loans into private ones. For those loans you lose RAP, PSLF, federal forgiveness, and federal forbearance and deferment. Federal Direct Loans already carry fixed rates, so a variable refinance adds rate risk on top of that.

How a variable rate is set

A variable rate is two numbers added together: an index that moves, and a margin that’s set in your loan agreement.

For the lenders we checked on Sept. 26, 2026, the index is the same: the 30-day average SOFR. SOFR is “a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities” (New York Fed). The New York Fed publishes the 30-day average every business day.

How each lender uses it, from its own disclosures:

• SoFi: a margin added to the 30-day average SOFR, published two business days before each month, rounded up to the nearest 0.01%. SoFi says the rate may change monthly.
• Earnest: a margin added to the 30-day average SOFR published on the 25th of the prior month. The rate changes on the 1st of each month and won’t increase more than once a month.
• Splash Financial: its marketplace disclosures describe the same method, a margin added to the 30-day average SOFR. The exact terms come from whichever partner lender makes the loan.

Your credit decides the margin. The index is the same for everyone.

How far the index can move

The 30-day average SOFR was about 3.71% on Sept. 25, 2026 (New York Fed). That number has not been steady:

Date	30-day average SOFR
End of 2021	About 0.05%
End of 2022	About 4.06%
August 2024 (the peak since 2021)	About 5.35%
Sept. 25, 2026	About 3.71%

In one year, 2022, the index rose about 4 percentage points. Every variable-rate borrower’s rate rose with it. Nobody can tell you where it goes next.

What the caps protect

A cap is the highest your variable rate can go. As of September 2026:

• SoFi: variable rates will never exceed 13.95%, for every term.
• Earnest: 8.95% for terms of 10 years or less, 9.95% for terms over 10 and up to 15 years, and 11.95% for terms over 15 years.
• Splash: its general refinance pages don’t state a cap. Ask the partner lender before you sign.

A cap protects you from a disaster, not from an expensive surprise. Every example below stays under all of these caps, and still costs thousands.

The math: $300,000 over 5 and 10 years

Assumptions: $300,000, a fixed example at 5.0% APR, and a variable example starting at 4.5% APR. We reset the variable rate once a year and recompute the payment over the time left. Real loans can reset monthly. All rates are examples, not offers; your rate depends on credit.

5-year payoff. Fixed at 5.0%: about $5,661 a month, $339,682 in total.

Variable scenario	Payment	Total paid	vs fixed
Stays at 4.5%	About $5,593	$335,574	About $4,100 less
Rises to 5.5% in year 2	$5,593, then $5,704	$340,907	About $1,200 more
Rises to 6.5% in year 2, 8.5% in year 3	$5,593, then up to $5,991	$352,580	About $12,900 more
Jumps to 8.5% in year 2 (a 2022-size move)	$5,593, then $6,045	$357,293	About $17,600 more

10-year payoff. Fixed at 5.0%: about $3,182 a month, $381,836 in total.

Variable scenario	Payment	Total paid	vs fixed
Stays at 4.5%	About $3,109	$373,098	About $8,700 less
Rises to 5.5% in year 2	$3,109, then $3,242	$387,462	About $5,600 more
Rises to 6.5% in year 2, 8.5% in year 3	$3,109, then up to $3,632	$426,558	About $44,700 more
Jumps to 8.5% in year 2	$3,109, then $3,661	$432,700	About $50,900 more

Two things stand out. First, the upside is small and the downside is large: the best case saves $4,100 to $8,700, and a bad year costs $17,600 to $50,900.

Second, the break-even is close. If the rate rises from 4.5% to just above 5.1% in year 2 and stays there, the 10-year variable loan already costs more than the 5.0% fixed. For the 5-year loan, the break-even is about 5.3%.

When a variable rate can make sense

A variable rate usually only pays off when all of these are true:

• You’ll pay it off fast, in about five years or less, and you have the cash flow to prove it.
• You could handle a jump. In the 5-year example, a 2022-size move adds about $450 a month. If that would squeeze you, don’t take the bet.
• You have a fallback. Savings, a spouse’s income, or a plan to pay the balance off early if rates spike.
• The gap is wide. A variable offer only a few tenths below fixed buys very little.

When it’s a bad bet

• A 10-year or longer term. More years means more chances for the index to rise.
• You’re buying a practice soon. Practice loans, a new mortgage and a rising student loan payment can all land at once.
• You picked variable only for the lower starting payment. If you need the lower payment to afford the loan, you can’t afford it when it rises.
• You haven’t ruled out PSLF or RAP. Then the question isn’t fixed or variable, it’s whether to refinance at all. See When refinancing is a mistake.

What to do

1. Pick your payoff horizon first. Paying off $300,000 in dental debt walks through 5- and 10-year timelines.
2. Get fixed and variable quotes for the same term with soft pulls. A marketplace like Splash or Credible shows several lenders at once.
3. Ask each lender for the margin and the cap in writing. The advertised range tells you neither.
4. Stress-test the variable offer. Add 2 and 4 points to the starting rate and see if you can still pay. If not, take the fixed rate.
5. Compare the rest of the loan too: hardship options, death and disability terms, and fees. See the lender comparison.