Student Loan Consolidation Rates

Student Loan Consolidation Rates a Complex Equation!

Student loan consolidation rates can be confusing. One would think that as a new graduate you have all the knowledge to navigate your new financial status as a student loan payee. But don’t be fooled by that cap and gown and shiny new briefcase, the system is one that must be entered into with a lot of thought and an eye on the big picture. In order to make the most of your money consolidating your loans is an excellent idea. It will help you lower your monthly payments, usually to a lower amount then paying each loan individually. Consolidation will also help manage those loans so that you don’t miss or make late payments because you lose track of who gets paid on what date. 

Federal student loan consolidations rates are relatively simple. If you have student loans, either subsidized or unsubsidized loans you are usually eligible to consolidate those loans. The rate of interest varies and is based on a formula set forth by the government. The statute says this, "the fixed rate is based on the weighted average of the interest rates on the loans at the time you consolidate and rounded up to the nearest one-eight of a percent." Confusing words. What it means is that an average of all of your interest rates is taken and rounded slightly to come up with an interest rate for the life of your loan. Those are important words, "for the life of your loan." Whatever rate you lock in at the time stays with you until the debt is repaid regardless of fluctuations in the market. This allows you to benefit when interest rates increase but prevents you from reducing the rate if interest rates go down. Keep in mind that federal student loan consolidation rates can not be more then 8.25 percent so they are still a fairly safe bet.

Student loan consolidation rates can be reduced slightly, a half a percent, if they are consolidated before the end of the grace period for repayment. This period is usually six months after a student has disenrolled from an educational program. Keep in mind that even if you do not graduate from a program your loans still have to be repaid. In order to get the best student loan consolidation rates check with your lender as soon as you know you will not return to school within the grace period.

When it comes time to check into student loan consolidation rates go into the process with an open mind. There is no need to worry if you do not have a great credit history or that you will be stuck with a lot of extra fees and penalties. Neither of these apply to federal student loan consolidation. However, lengthening the term of your loan will increase the amount you owe with interest. Be sure to take that cost into account when you decide to consolidate your loan.