So, I have the option to lock in the rate on my ~$40,000 student loan and thought I'd get the boards input. On regular schedule I will pay it off in 2029 some time, so 13 years. The current rate is 2.9% locked until october this year, at which point I can let it float or lock it again.
At the moment the options are (Assuming little change by Oct):
variable: 1.9%
3 year: 1.6%
5 year: 1.9%
10 year: 2.55%
The catch is with a locked rate there is a pre-payment penalty, equal to the difference in the rate if it has gone up (i.e. what the lender looses by me prepaying). But I'm currently just paying the minimum, and with these rates I'm tempted to continue that. And between maxing two 401ks, Roths, mortgage, daycare, kid expenses and bit of other investing there isn't a whole lot extra cash, and I usually find other uses for it anyway. I'll have about 1/3 the loan amount free in cash in Oct, but don't really feel like paying anything extra..?
Tempted to lock in 2.55% for 10 years, which would basically be the end of my loan. Or 1.9% for 5 years, hoping I can kill it at that point if rates are high, or let it ride if they're not? Or do I not have the appropriate amount of debt aversion and should focus on wiping out the loan?
edit: for context we're mid 30s with about $250k invested assets in various accounts. 4 years from freeing up $1500/month from daycare, unless we have another..