SOFR is based on the rates that financial institutions pay one another for overnight loans or repos and is published daily by the Federal Reserve Bank of New York (Fed). In 2017, the Federal Reserve formed a group of large financial institutions known as the Alternative Reference Rate Committee (ARRC) to work on finding an alternative to LIBOR. They ultimately chose SOFR and this choice was endorsed by the UK Regulator, the Financial Conduct Authority.
How does the 30-day average CME Term SOFR affect you?
The 30-day Average SOFR is the benchmark rate that we will apply from 8 January 2024 to the interest rate of all loans finalized after 30 June 2023.
30-day average SOFR is a benchmark interest rate based on SOFR. The SOFR 30-day average rate is calculated as the average of the SOFR rates observed over a 30 calendar-day period. It is used as a benchmark for various financial instruments, including student loans.
If you’re interested in learning more about SOFR, click here.