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How to Make the Most of Student Loan
Consolidation Rates?
The interest rates for student loan consolidation are
based on the weighted average of all student loan rates.
Federal student loans have different interest rates
depending on the type of loan and the disbursement date of
the loan. If you still have any federal loans at variable
rates, now is the best time to consolidate these loans.
When you consolidate your federal student loans, your
interest rate will be the weighted average of all your loans
rounded up to the nearest 1/8 percent. Your final
consolidation rates will be 2 percent for Stafford Loans
during the grace period; 2.5 percent in repayment and 3.38
percent for federal PLUS loans.
Any private student loan consolidation
rates
remain variable adding on a margin for
the borrower or the co-signer.
The origination fees for these loans also vary depending on
the credit of the borrower or of the co-signer. Any fees is
added back to the loan when the repayment begins adding to
the borrowed amount but reducing any pocket expense when the
loan closes.
A simple way to calculate what your consolidated rate would
be is to first consider your current loans. If three quarter
of your loans is at 6% and the remaining one quarter at 8%,
then this is how you must calculate your new consolidated
rate:
6% x 0.75 = 4.5%
Plus
8% x 0.25 = 2%
Total new rate = 6.5%
A considerable drop in rates comes when you’ve had a number
of government PLUS loans. The maximum student loan
consolidation rate is 8.25% and these are higher interest
rates. Hence, at 8.25%, the interest rate is capped. So, if
you have several PLUS loans at the interest rate of 8.50%,
all of these will be consolidated at an interest rate of
8.25%.
Private loans can also be consolidated though through a
private lender. Education can be costly but managing your
debts through student loan consolidation can be very
helpful.
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