New index established for calculating interest rates
Bank of North Dakota bases many of its variable interest rate loans using the benchmark index U.S. Dollar LIBOR (USD LIBOR). USD LIBOR will be discontinued after June 30, 2023.
A change in the benchmark index for calculating interest on your loan is supported by either the Federal Adjustable Interest Rate (LIBOR) Act of 2021 or the terms of your promissory note. Based on the discontinuation of LIBOR, the interest rate calculation index for your student loan will change to Secured Overnight Financing Rate (SOFR).
Because LIBOR is generally higher than SOFR, this change of index alone will not increase your interest rate.
- Bank of North Dakota plans to transition to SOFR effective July 1, 2023, for student loan customers. The transition for business and agricultural loan customers is occurring during the loan renewal process.
- The transition to SOFR does not change the length of the loan term.
- No action from customers is required.
How will the transition to SOFR affect interest rates?
The interest rate on fixed rate loans remains the same. The interest rate on variable rate loans will generally remain the same or will be slightly lower because LIBOR is generally higher than SOFR. This change of index alone will not increase your interest rate.
However, customers should realize that in general, we are in an environment of increasing interest rates. Due to that, BND customers with variable rate loans may see an increase in their interest rate. For individuals with a DEAL One variable rate student loan, the interest rate increase cannot be more than 1% from one year to the next on the anniversary date of the loan commitment.