Interest Rates are at Record Lows. What Does That Mean for Nurses?

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Now is a stressful time to be a nurse, and the last thing you want to worry about is your finances. But with interest rates at an all-time low, you could be missing out on big savings.

You pay interest on all that you’re borrowing: student loans, auto loans, mortgages … you name it. Interest rates are at an all-time low now, but they probably weren’t when you took out your student loans. It’s likely that you’re paying too much for your debt.

What can you do about it? Refinance and take advantage of current rates — potentially saving yourself hundreds of dollars a month. In other words, get a new loan at a lower interest rate that automatically pays off your existing higher-interest rate one. So you owe the same but pay less each month.

Are Rates Really at Record Lows?

Yes! Interest rates are currently at record lows. Check out this chart published by the Federal Reserve Bank of St. Louis. It shows interest rates going back 65 years.

Effective federal funds rate chart from FRED

Can you see where they were in April 2020, the last month shown? At 0.5%, they’re so close to 0.0% that you’ll need great eyesight to make out the difference.

This chart is showing the “effective federal funds rate,” which is the rate banks charge each other. And you’re not personally going to be offered 0.5%, even if you’re the most creditworthy nurse in America.

But many consumer loan rates are tied to the federal funds rate. And, when it’s super low, it lowers the rates on many types of loans including student loans.

What’s Been Happening to Student Loan Rates

There was a time when lenders were regularly charging 12% or more on student loans. If your loans date back to that time, then you stand to save a lot by refinancing.

In our research, we requested student loan refinance quotes. The lowest rate we were offered was 1.99%.** That’s an amazing rate, but keep in mind, rates vary according to your state, credit, income, and other factors.

How Much Could You Save?

Statistics only get you so far. So let’s look at some real-world examples of potential savings. We’re assuming that you’ll refinance to a 10-year, variable-rate, private loan with the same balance as your existing one:

Scenario 1

  • You owe $50,000
  • Your current interest rate is 12%
  • You refinance to a 2% loan with a $50,000 balance
  • You save $460 every month — or $30,848 over the life of the loan

Scenario 2

  • You owe $37,000 (average debt for a newly qualified RN)
  • Your current interest rate is 5.8% (average rate for all student loans)
  • You refinance to a 3% loan with a $37,000 balance
  • You save over $50 every month — or $6,050 over the life of the loan

Scenario 3

  • You owe $100,000
  • Your current interest rate is 8%
  • You refinance to a 4% loan with a $100,000 balance
  • You save over $200 every month — or close to $24,000 over the life of the loan

Scenario 4

  • You owe $20,000
  • Your current interest rate is 9%
  • You refinance to a 4% loan with a $20,000 balance
  • You save over $50 every month — or more than $6,000 over the life of the loan

You’ll notice that even a relatively small savings of $50 a month adds up over the lifetime of your loan. It adds up to a total savings of $6,000 over 10 years.

What would you do with an extra $6,000?

But Not Everyone Should Refinance Their Student Loan

Nurses should keep in mind that signing up for any big new loan needs to be taken seriously. You must be sure that you understand what you’re getting into and that you’re comfortable that you’ve found a good lender.

You also need to be aware that refinancing a federal student loan to a private one has some implications that are important to some nurses. For example, private loans will not qualify for loan forgiveness programs or income-driven repayment plans.

But, for many, the lower costs of private student loans outweigh those federal benefits. If you’re not in such a program and are secure in your ability to keep up payments, then the savings may be attractive.

Regardless of how you do it, now is a great time to take advantage of historically low interest rates. Saving money will certainly relieve some stress and a little less stress goes a long way these days!