Earnest variable vs fixed rates: which refinancing option saves you more?

Introduction and quick decision guide

Earnest offers fixed refinance rates of 2.47% - 7.99% APR and variable rates of 1.74% - 7.99% APR as of January 2025, according to Earnest.com. Fixed rates provide payment certainty for the life of the loan, while variable rates may start lower but fluctuate monthly based on market conditions. This guide compares both options to help you choose the right structure for your repayment timeline and risk tolerance.

By the end of this guide, you will be able to evaluate the long-term cost differences between rate types, utilize Earnest’s specific features to lower your interest costs, and select the option that aligns with your monthly budget.

Before diving into the mechanics of Precision Pricing and market indices, use this decision matrix to identify which loan structure typically aligns with your financial profile.

Source: College Finance analysis of standard loan amortization principles (as of January 2025).

Understanding Earnest’s rate structure and Precision Pricing

To make an informed decision between fixed and variable rates, it is helpful to understand how Earnest calculates these numbers. Unlike many lenders that force borrowers into rigid 5, 10, or 15-year terms, Earnest utilizes a proprietary model known as “Precision Pricing.” This approach allows borrowers to customize their loan terms and monthly payments, which directly influences the interest rate offered.

Precision Pricing allows you to select your exact monthly payment or desired loan term down to the month. For example, instead of choosing between a 5-year or 10-year term, you might choose a 7-year, 4-month term because that specific timeline results in a monthly payment that fits your budget perfectly. This customization applies to both fixed and variable rate options.

Because interest rates are generally tied to the length of the loan—shorter terms typically garner lower rates—this feature allows you to find the “sweet spot” between a manageable monthly payment and the lowest possible APR. By tweaking your term by just a few months, you may be able to secure a slightly lower fixed or variable rate.

If you consider a variable rate loan, it is critical to understand the index that drives the changes. As of January 2025, Earnest variable rate loans are indexed to the 30-day Average Secured Overnight Financing Rate (SOFR). The New York Fed publishes SOFR data daily, reflecting the cost of borrowing cash overnight backed by Treasury securities.

Your variable rate is calculated as:

• The Index (30-day Average SOFR) + Your Fixed Margin = Your Total Interest Rate

While the index changes based on the economy, your margin—which is determined by your creditworthiness and financial profile—remains the same for the life of the loan. Earnest adjusts variable rates on a monthly basis. This means if the SOFR increases, your interest rate and monthly payment will increase the following month. Conversely, if the SOFR decreases, your costs go down.

Whether you choose fixed or variable, Earnest determines your specific offer based on a holistic review of your financial health. This includes your credit score, savings patterns, education history, and debt-to-income ratio. This underwriting process is designed to reward financially responsible borrowers with competitive rates, often creating a narrow spread between their variable and fixed offers at origination.

Earnest variable rate refinancing: features and considerations

Variable rate loans often feature the lowest advertised Annual Percentage Rates (APRs), making them an attractive option for borrowers looking to minimize interest accrual immediately. However, the defining feature of a variable rate is change. Understanding the specific terms associated with Earnest’s variable product is essential for managing the inherent risk.

Earnest offers variable rate refinancing terms ranging from 5 to 20 years. Generally, the shorter the term you select, the lower the starting APR and margin you will be offered. It is important to note that while the term length is set at origination, the monthly payment amount is not. With Earnest, if your interest rate rises due to an increase in the 30-day Average SOFR, your minimum monthly payment will increase to ensure the loan is still paid off by the end of the original term.

According to the Consumer Financial Protection Bureau, variable-rate loans transfer the risk of rising interest rates from the lender to the borrower. This is why lenders can offer lower starting rates compared to fixed options—you are effectively “paying” for the potential discount by accepting the risk of future volatility.

There are specific scenarios where a variable rate is strategically advantageous:

• The “Aggressive Payoff” Strategy: If you plan to refinance a $50,000 loan but intend to pay it off in 2 or 3 years rather than the standard 10, a variable rate allows you to capitalize on a lower interest rate during that short window. Even if rates rise, the principal balance decreases so quickly that the impact of higher interest is minimized.
• Falling Rate Environments: When the Federal Reserve cuts benchmark rates, variable rate borrowers see their interest costs drop automatically without needing to refinance again.
• Lower Initial Payments: For borrowers with tight current cash flow who expect significant income growth (like medical residents or law associates), the lower initial rate can provide temporary relief, provided they can handle increases later.

The primary risk is uncapped payment growth in the short term. While Earnest loans do have a maximum interest rate cap (often mandated by state law, typically ranging between 8.95% and 36% depending on the state as of January 2025), hitting that cap would result in a drastically higher monthly payment. Borrowers must be prepared for the possibility that their rate could double over the life of the loan.

Historically, rates have stayed low for long periods, but they have also spiked rapidly during inflationary periods. A variable rate loan requires active management; you cannot simply set up autopay and ignore the market for a decade. You must be willing to monitor economic trends and potentially refinance into a fixed rate if the market turns against you.

Earnest fixed rate refinancing: features and stability

For many students and parents, the primary goal of refinancing is to simplify their financial life and eliminate surprises. Earnest’s fixed rate refinancing offers this stability, locking in an interest rate that will never change regardless of what happens in the global economy or stock market.

Earnest offers fixed rate terms generally ranging from 5 to 20 years. When you sign the promissory note for a fixed rate loan, you are purchasing certainty. Your monthly payment amount is calculated at the start and remains identical for every month of the repayment period (assuming you do not make extra payments). This predictability makes fixed rates the preferred choice for borrowers who maintain strict monthly budgets or those who are managing a family’s long-term cash flow.

You will typically notice that fixed rates are higher than variable rates at the time of application. You can think of this difference—the “spread”—as an insurance premium. You are paying a slightly higher cost upfront to insure yourself against the risk of rates rising in the future. For a 10-year or 15-year repayment plan, this protection is often valuable. Over a decade, economic cycles are inevitable, and a fixed rate ensures you ride out high-interest periods without your required payment changing by a single penny.

Fixed rates are particularly well-suited for:

• Parent Borrowers: Parents nearing retirement often prefer fixed expenses to ensure their retirement planning isn’t derailed by market volatility.
• Long-Term Borrowers: If you are selecting a 15-year or 20-year term to get the lowest possible monthly payment, a fixed rate is strongly recommended. Over two decades, the likelihood of a high-interest rate environment occurring is high.
• “Set It and Forget It” Personalities: If you do not want to follow Federal Reserve meetings or track the SOFR index, a fixed rate allows you to automate your payments and focus your mental energy elsewhere.

According to Mark Kantrowitz, financial aid expert, “Private loans can be a good option when federal loans don’t cover the full cost of interest,” but he often advises caution regarding variable rates for those without significant financial flexibility. The stability of a fixed rate ensures that the debt remains manageable even if your personal financial situation tightens.

Making your decision: comparing variable vs. fixed with Earnest

Deciding between variable and fixed rates is not just a math problem; it is a question of psychology and budget flexibility. Once you understand the mechanics, you need a framework to apply this to your specific loan balance and income.

The first step is to get concrete numbers. Earnest offers a rate check tool that performs a soft credit pull, meaning it will not impact your credit score. You should use this tool to view side-by-side comparisons of the fixed and variable rates you actually qualify for. Often, the “starting at” rates advertised on websites are for the most creditworthy borrowers, so your personalized spread might be different.

To make a mathematical decision, calculate the “break-even” point. If the variable rate is 1.00% lower than the fixed rate, calculate how much interest that saves you in the first year. Then, estimate how much rates would need to rise to erase those savings.

For example, on a $40,000 loan:

Source: College Finance calculations (assumes standard amortization; as of January 2025).

In this scenario, the variable rate saves you roughly $34 per month initially. You must ask yourself: Is saving $34 a month worth the risk that your payment could eventually increase by $100 or more per month? For many borrowers with tight budgets, the peace of mind of the fixed rate is worth the premium.

According to Sandy Baum, senior fellow at the Urban Institute, “Borrowing is not inherently bad; the question is how much, and under what terms.” When choosing your terms with Earnest, ensure that the potential savings of a variable rate or the stability of a fixed rate aligns with your broader financial goals, such as buying a home or saving for retirement.

If you have a robust emergency fund and high disposable income, you are better positioned to take the risk of a variable rate. If your budget is allocated down to the dollar, a fixed rate is the prudent choice to avoid financial distress.

Earnest-specific features that impact your rate choice

Earnest offers several unique features that differentiate it from other private lenders. These features can influence your decision between fixed and variable rates by offering flexibility that might mitigate some risks.

Earnest allows borrowers to set up biweekly payments rather than monthly payments. By paying half of your monthly payment every two weeks, you end up making 26 half-payments (or 13 full payments) per year. This strategy reduces your principal balance faster and lowers total interest paid. For variable rate borrowers, this is a powerful tool; by paying down principal aggressively, you reduce the impact of any future rate hikes.

Borrowers who make on-time payments for six consecutive months may be eligible to request to skip a payment once every 12 months. This feature is available for both fixed and variable rate loans. While interest continues to accrue during the skipped month, this flexibility provides a safety net. If you choose a variable rate and have an unexpectedly tight month due to other expenses, knowing you have the option to skip a payment can provide psychological comfort, though it should be used sparingly.

Earnest charges no origination fees, no prepayment penalties, and no late fees. The absence of prepayment penalties is particularly relevant for the variable vs. fixed decision. If you choose a variable rate and market conditions change drastically, you can refinance again or pay off the loan early without incurring any penalty fees. This allows you to treat a variable rate loan as a temporary strategy rather than a permanent commitment.

If you experience involuntary unemployment or other economic hardships, Earnest offers up to 9 months of forbearance over the life of the loan (typically in 3-month increments). This protection applies to both rate types. However, keep in mind that interest continues to accrue during forbearance. If you have a variable rate loan and rates are high during your forbearance period, your balance could grow significantly faster than if you had a fixed rate.

Frequently asked questions

You cannot simply “switch” your existing loan from variable to fixed with a phone call. However, you can apply to refinance your Earnest loan into a new Earnest loan with a fixed rate. This requires a new application and credit check, and your new rate will be based on current market conditions and your current credit profile.

Earnest adjusts variable rates on a monthly basis. If the 30-day Average SOFR index changes, your interest rate will be adjusted, and your monthly payment amount will change starting with your next bill to ensure you stay on track to pay off the loan by the end of your term.

Yes, according to Earnest.com, Earnest typically offers a 0.25% Auto Pay discount as of January 2025. This discount applies to both fixed and variable rate loans. It is important to maintain autopay to keep this lower rate; if you cancel autopay, your rate will increase by that 0.25% margin.

If you want to change your loan term after the loan is funded (e.g., switching from 10 years to 5 years), you would generally need to refinance into a new loan. However, Earnest allows you to increase your monthly payment at any time without refinancing, which effectively shortens your term and reduces total interest costs.

While Earnest does not publish a strict minimum credit score for every scenario, the most competitive fixed and variable rates are generally reserved for borrowers (or cosigners) with credit scores of 700 or higher, a stable income, and a low debt-to-income ratio.

Choosing between Earnest’s variable and fixed refinance rates ultimately comes down to your timeline and your relationship with risk. There is no single “best” option, only the option that best fits your financial life right now.

• Choose Variable If: You plan to pay off the loan in less than 5 years, you have a high risk tolerance, and your monthly budget has plenty of wiggle room to absorb payment increases.
• Choose Fixed If: You need absolute predictability for budgeting, you plan to take 10+ years to repay the loan, or you believe interest rates are likely to rise in the future.
• Action Step: Run the numbers. Use a calculator to see the difference in total interest between the two options over the life of the loan.

Once you have weighed the risks and benefits, the best way to move forward is to view your actual personalized offers.

Compare your personalized Earnest rates — trusted by 375,000+ borrowers

References and resources

• Complete Guide to Student Loan Refinancing – A comprehensive look at when and how to refinance.
• Private Student Loans Guide – Understanding the broader private lending landscape.
• Income-Driven Repayment Plans – Learn about the federal benefits you give up by refinancing.
• StudentAid.gov Consolidation – Official federal resource on consolidating federal loans.
• CFPB Paying for College – Tools and information from the Consumer Financial Protection Bureau.