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.
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