No action is required at this time for existing Laurel Road members with a LIBOR-based variable loan. Laurel Road plans to transition these loans to SOFR by June 30, 2023, but our team will provide timely updates to existing members who are impacted in advance of the scheduled transition.
Your student loan refinance documents specify that in the event LIBOR is no longer available, an alternative published benchmark will be selected to serve as the Index. It’s important to note that once your current variable loan transitions to SOFR, the new index change will not change most other terms of the loan, such as the maximum interest rate payable during the term of the loan or the timing of any interest rate resets. For additional information on the discontinuation of LIBOR, we recommend visiting the Alternative Reference Rates Committee website, maintained by the Federal Reserve Bank of New York. Or if you have specific questions about your existing student loan, please reach out to the Laurel Road Member Services at firstname.lastname@example.org.
The industry-wide transition to a new alternative rate index for adjustable (variable) rate products (due to concerns about the of LIBOR (the London Interbank Offered Rate)) has been in the works for several years. In anticipation of this move, the ICE Benchmark Administration (IBA), which administers LIBOR, has taken steps to eventually phase out LIBOR.
Given the transition to a new variable rate benchmark, per regulatory and Alternative Reference Rate Committee (ARRC) guidance, Laurel Road will begin limiting new LIBOR-based student loan refinances starting on October 29th, 2021, and will adopt SOFR as the selected alternative USD index rate.
When you take out a student loan with Laurel Road, you’ll receive an interest rate on that new loan. How is the interest rate determined? Financial institutions and lenders use a benchmark to determine the interest rate they’ll charge you, with an additional margin set by the lender that factors in your current credit standing.
For decades, the most common adjustable rate benchmark index used by lenders for loans with a variable interest rate has been LIBOR, or the London Interbank Offered Rate – the average rate a panel of international banks charge each other for short-term loans on the London interbank market.
LIBOR will be phased out by June 30, 2023 due to concerns it has become an increasingly inaccurate indication of the true costs of borrowing. Beginning in 2021, the alternative will be SOFR, or the Secured Overnight Financing Rate – a benchmark interest rate based on the most recent overnight borrowing costs on interbank transactions in the U.S. Treasury securities repurchase marketplace.
Laurel Road will begin limiting new LIBOR-based student loan refinances starting on October 29th, 2021, and will adopt SOFR as the selected alternative USD index rate for new student loans with a variable interest rate. Borrowers with a fixed rate loan will not be impacted by this update. If you are a current borrower with a variable rate loan, learn more here.
Laurel Road will refinance up to $50,000* for Associate Degree loans in the eligible healthcare field. Please see full eligibility requirements here.
*Parents who are borrowing on behalf of their children are not subject to the $50,000 loan max