Your Variable Interest Rate, LIBOR, and SOFR – What You Need to Know

Soon, part of the way the variable interest rates are calculated on some private student loans will change. Banks, financial institutions, and regulators use a benchmark index to calculate the interest rate on variable rate loans. The benchmark index, LIBOR, that has been used for many years, is now being phased out worldwide. A new index, SOFR, will replace LIBOR.

Congress has determined that the new SOFR benchmark index is comparable to the previous one, LIBOR. That means the new rate should not change how much you pay over time, on average.

The new rate does not impact any other terms, conditions, or benefits associated with your student loan.

What is the difference between fixed vs. variable interest rates?

A variable interest rate fluctuates up or down over the course of your repayment period. It is composed of two parts: a fixed margin and a variable interest rate index. The index that College Ave and other financial institutions have historically used is the LIBOR index. A fixed margin is applied in addition to the benchmark, and is based on your anticipated ability to repay the loan.

A fixed interest rate remains the same over the life of the loan.

Our team has written a comprehensive guide about fixed vs. variable interest rates.

What is changing?

College Ave utilizes the 1-month U.S. Dollar London Interbank Offered Rate (LIBOR) benchmark to calculate the variable interest rate some student loans. The LIBOR index is being phased out and will be replaced with the 1-month Spread-Adjusted CME Term Secured Overnight Financing Rate (SOFR).

Since this is a shift to a different index, this is not a refinance of your student loan; it is merely a change to the benchmark we use to determine your variable interest rate each month. This will happen automatically, and you should not notice a difference in the way we service your loan.

You aren’t alone. This change impacts millions of borrowers like you, with all lenders across the country.

How do I know what type of interest rate I have?

Your rate and rate type can be found on your billing statement and your loan disclosure documents.

What happens next?

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

You will receive a formal notification in advance of the effective date. That letter or email will explain the change in your loan’s benchmark index and answer basic questions. College Ave utilizes the market index from the beginning of the prior month to set the current month’s interest rate. LIBOR will no longer be reported or available as of July 1, 2023, as such your College Ave student loan will begin utilizing SOFR on August 1, 2023 (based on the SOFR from early July).

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 their customers. We will send you updates about this topic so you can understand the scope and timing of the rate change.

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.

What is my new interest rate?

If your loan is a variable rate loan, your interest rate will remain variable. It will change with a frequency comparable to how it changed before, based on the terms and conditions of your loan.

We will calculate your interest rate using SOFR plus whatever margin you originally agreed to when taking out the loan.

Conversely, if your loan is a fixed rate loan, your interest rate will not change.

Will this impact my other student loans?

Federal student loans are not impacted by this change, those loans have interest rates set by law, so no update is needed. Any student loans with fixed interest rates are also not impacted by this change as they are not based on any benchmark index.

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.

Because it is being phased out, LIBOR will not be available after June 30, 2023, and Congress has provided guidance on how we can adjust the benchmark for your loan. This ensures that both you and your loan holder have a predictable and stable way to calculate your rate.

Other new loans may have a different benchmark, so you can always explore your refinancing options. A new, refinanced student loan will have its own interest rate calculation (still not LIBOR), but your new lender may use an option other than one that is SOFR-based.

Could this happen again?

Federal regulators and Congress took 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 it 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


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