Interest Rates Are Rising: 6 Actions You Should Take ASAP

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution.

rising interest rates

We’ve got your back! Student Loan Hero is a completely free website 100% focused on helping student loan borrowers get the answers they need. Read more

How do we make money? It’s actually pretty simple. If you choose to check out and become a customer of any of the loan providers featured on our site, we get compensated for sending you their way. This helps pay for our amazing staff of writers (many of which are paying back student loans of their own!).

Bottom line: We’re here for you. So please learn all you can, email us with any questions, and feel free to visit or not visit any of the loan providers on our site. Read less

Those paying attention to the U.S. financial markets have probably seen plenty of news about rising interest rates.

Not only have mortgage rates jumped to more than four percent following the November election results, but the Federal Reserve recently opted to raise its rates for the second time in almost a decade.

That means the Federal Open Market Committee decided to raise its target rate range from 0.25-0.50% to 0.50-0.75%. The last time rates were raised was a year ago, in December 2015. Before that, rates were lowered to zero during the 2008 financial crisis.

The rates set by the FOMC are tied closely to banks’ prime rates. These are used to determine the interest rates they offer on a variety of lending products like credit cards and student loans.

So what does this mean for your money?

Interest rates rising will mean that borrowing will get more expensive in 2017. Especially since the FOMC announced it expected to implement three more rate hikes in 2017.

However, it also provides some opportunities to earn greater returns, as well. Here are some moves you should make in 2016 to capitalize on rising interest rates throughout 2017.

1. Refinance your student loans

If you have student loans with higher rates (think six to seven percent or higher), refinancing them could be a smart option for you.

Some of the best lenders to refinance student loans with, like LendKey, are offering rates as low as 2.47% APR. But with interest rates on the rise, these significantly lower student loan rates might be more and more scarce in 2017. Want to get a sense of whether you might qualify to refinance? Take our refinancing eligibility quiz!

Essentially, student loan rates today are the best you’ll get for a while. So if you’ve been considering a student loan refinance, it might be time to pull the trigger and lock in a lower interest rate.

Your chances to save will be much better now rather than later.

Start Your LendKey Application Today

2. Switch to a fixed rate from a variable

If you have a product with a variable rate, you can expect that rate — and your monthly payments — to go up in 2017.

Following the FOMC’s announcement of an interest rate raise, several major banks like JPMorgan Chase and Citi also bumped their prime rates up from 3.50% to 3.75%, according to CNBC.

Banks’ prime rates are also tied to variable rates on products like credit cards, adjustable-rate mortgages, or variable-rate student loans. When a bank’s prime rate goes up, these products’ variable interest rates go up the same amount.

If you have a loan with a variable rate, this might be another reason to consider refinancing it soon. With a refinance, you can pay off the variable-rate loan and replace it with a fixed rate loan, instead.

Of course, variable rates often start lower than fixed rates. So it’s possible that you might not see savings when refinancing to a fixed rate for a year or more.

But if you have better credit now than when you originated your variable rate loan and are willing to switch to a shorter term, you could be a good candidate for refinancing to a fixed rate. Especially if you don’t like taking the risk of a variable rate going up in the coming years.

3. Pay down debts with variable rates

For many borrowers, refinancing their variable rate loan might not make sense. As mentioned above, it’s possible that sticking with the variable rate could still be cheaper than a similar fixed-rate loan.

Or, perhaps you don’t have the credit to qualify for a refinance with a lower rate. Keep in mind refinancing may require you to pay origination and loan fees which would potentially cancel out any savings on your end.

However, there are other ways to pay less on your loan. Even if your variable rate adjusts upward.

If you pay down extra towards your debts, for example, you’ll lower your principal. And, you’ll have a smaller balance each month that you’re getting charged interest on.

Making extra payments can also help you pay your loan off ahead of time. Ultimately, this will give variable rates less time to go up and become unaffordable.

4. Shop around for a credit card

With variable rates set to rise, your credit card could suddenly be more expensive.

A 0.25% raise in prime rates will mean that your variable credit card rate can jump by one to two percent, according to The New York Times.

It doesn’t sound like much, right? But a raise from, say, 15 percent to 17 percent would add around $20 in interest costs for every $1,000 in credit card balance you carried throughout the year.

If your credit card rates are already pretty high, another bump will only make this kind of debt more expensive for you.

Therefore, finding a new credit card with a lower interest rate can save you money. Especially if you tend to carry a balance month-to-month. This will be especially true as rates continue to rise.

If you have a high credit card balance, the best move might be to consider opening a new card with a zero percent introductory rate. You can transfer your balance to the 0-rate credit card and work toward paying it off without accruing any interest.

5. Work on your credit

One of the most effective ways to get cheap credit is to maintain good credit. Although rising interest rates are outside of your control, your credit history is something you can directly improve and positively impact your finances.

So if you’re planning on making a big purchase in 2017 that you’ll need a loan for, focus on cleaning up your credit.

Remember, rising interest rates won’t affect the rates you’re offered on a car loan, for instance, as much as your creditworthiness will.

So if you work to improve your credit in 2017, you’ll put yourself in a position to get the best interest rates available. Whatever rate hikes might come.

What should you focus on to build credit?

First off, you’ll never have excellent credit if you’re not making on-time payments on your existing credit. So if this is a struggle, start there.

And if you don’t have any credit, consider getting a secured credit card and making payments responsibly on it. That can be a good place to start building credit.

If you have a credit card, keep up with your payments by making them on-time. This can help keep credit card balance low each month and give you a lower credit utilization ratio.

At the end of the day, paying down existing debts and avoiding taking out lots of new debt will help your credit score go up.

6. Shop for better deposit rates

The biggest effect rising interest rates will have on consumers will be that credit will become more expensive.

But, theoretically, if banks are charging higher interest rates, then they might have more margins to give borrowers better returns on deposits.

However, the last rate hike in December 2015 didn’t actually result in higher savings or deposit rates at most banks.

If banks do raise their deposit rates, it will likely be a very small bump. And it won’t come until around mid-2017, projects USA Today.

But just because most banks won’t be offering higher savings rates doesn’t mean they aren’t out there. Some financial institutions that make a point of offering competitive savings rates might offer even better deals.

And, savings rates over 1.00% might be easier to find. Check online banks, credit unions, and smaller, community banks for deposit products that offer higher returns.

How does rising interest rates affect you?

Overall, rising interest rates will have a relatively small impact on most consumers’ finances. The increases will be small, but they will be there.

If you keep an eye on your debts and make some of these smart financial moves, you’ll put yourself in a position to avoid the worst of rising interest rates. And you might even be able to take advantage of higher rates to grow your savings.

Do you have any thoughts on the Fed’s recent decision to raise interest rates? Share them in our comments section below!

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderVariable APREligible Degrees 
Get real rates from up to 4 Lenders at once

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (

3 Important Disclosures for CommonBond.

CommonBond Disclosures

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit We also have several resources available to help the borrower make a decision at, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.