Best Student Loan Consolidation Rates
Having so many student loans can give a student a lot of headach
and can be quite a hassle when a repayment starts after when student gets graduate. It can be very difficult
for many students to manage many loan repayments.
What is a Student Loan Consolidation?
A student loan consolidation means having all your
student loans merged into one account, with a much more manageable payment plan. Usually, the rate of a
consolidated loan is also lower and therefore, a huge help to those already under a financial strain.
Why should you consolidate your student loans?
There are a lot of advantages to consolidating your
student loans. Instead of multiple payments, each with their own high interest rate, consolidating puts all your
existing student loans into one account. There is only one monthly payment and the interest rate is normally
lower than what you were already paying when these accounts were separate. The rate is a combined average of all
your loans and many people who have consolidated have found a savings of nearly 20% off what they’d been paying
before merging their student loans.
It is also easier to keep track of your loans and
the progress you are making in repaying them, as you will have only have one set of paperwork to read over and
one manager to deal with. Because rates at an all time low, it is a perfect time to get a fixed number by
combining your student loans and guaranteeing how much you’ll end up paying over the lifetime of your
loan.
What types
of loans are eligible for consolidation?
Nearly all of the student loans that are eligible
for consolidation are federal loans and include: FFELP (Stafford, PLUS, and SLS), FISL, Perkins, Health
Professional loans, NSL, HEAL, and also Guaranteed Student loans and Direct loans. Currently, Private student
loans are not eligible but many lenders offer private consolidation loans. You should consult with your
financial advisor for all available options.
What kind
of consolidation rates can you expect?
A consolidate rate is based on what you were
already paying. For example, if you had two loans, their rate of interest would be merged together for an
average rate. Here’s an example of how it’s actually added: (The .75 is the size of the loan, meaning three
quarters of your total debt is that particular loan.)
7% x .25 = 1.75%
plus
9% x .75 = 6.75%
New Rate =
8.50%
Another big saving
comes in if you have PLUS loans, which are now capped at a maximum rate of 8.25%. If your current rates are
above that for PLUS loans, consolidating them could bring a big drop in your monthly payment.
Helpful Information
Until 2013, graduate
Stafford Loans, subsidized and unsubsidized, have a fixed interest rate of 6.8%. Those loans disbursed before
July 1, 2006, will be variable until consolidated.
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