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Student Loan Consolidation Rate


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Welcome to our Student Loan Consolidation Rate mini website. This site is designed for the student borrower who is contemplating the possibility of consolidating his or her student loans into one loan. Here you will also find our Book Store. This store consists of books on how to become debt free and college education financing. We strongly urge you to browse our book store as part of your information gathering. Here our main discussion is about student loan consolidation, but you should also investigate other methods which will help you reach your goal of becoming debt free.

Student loan consolidation works in principle the same way that a mortgage refinance works. You are simply obtaining a loan with hopefully better terms in order to pay off another loan or loans where the terms are relatively not as good.

Our goal here is to clear up some misunderstanding that seems to be floating around the Internet about student loan consolidation. This misunderstanding centers around the interest rate for the consolidated loan. Many student loan brokers and some lenders want you to believe that the total interest paid for the consolidated student loan is less then what you would pay compared to the accumulated interest paid for several student loans. Here we will explain that this is not always the case, and that the timing of the consolidation is the most important factor if you desire to lock in a lower interest rate for the consolidated loan.

If you consolidate your student loans and you extend the term length, while reducing your monthly payments, you can actually end up paying more in total interest during the life of the loan. We will expand on this further in our discussion.

The potential and most important advantage to student loan consolidation is to lock in a lower interest rate for the consolidated loan. Lets first examine how the lender determines the interest rate for the consolidated loan.

For student loan consolidation, the interest rate for the consolidated loan is the weighted mean interest rate for the total student loans, and rounded up to the nearest 1/8 of a percent. Lets look at an example of this. Lets say you have two loans that you want to consolidate. One loan is $5,000 at 5% and the other loan is $10,000 at 6.8%. The formula for the weighted mean here would be as follows: ( symbol * means multiply)

$5,000 * 5.0% + $10,000 * 6.8%
——————————————————— = 6.2%
$5,000 + $10,000

The weighted mean here is 6.2%. To round up to the nearest 1/8 percent gives you 6.25%. The interest rate for the consolidated loan will always be between the highest and the lowest interest rate for the various loans that you have, and can not be greater then 8.25%.

In the example given above on a 10 year term, $10,000 at 6.8% has a monthly payment of $115.08 and total interest paid of $3,809.66, $5,000 at 5.0% has a monthly payment of $53.03 and total interest paid of $1,364.03. If you add these, you obtain a total monthly payment of $168.11 and a total interest paid of $5,173.69. Using the weighted average, $15,000 at 6.2% has a monthly payment of $168.04 and a total interest paid of $5,165.01. As you can see the total interest paid is about the same.

When you consolidate, the interest rate is rounded up to the nearest 1/8th of a point, so $15,000 at 6.25% has monthly payments of $168.42 and total interest of $5,210.42, which results in a slight increase. So in this particular case you can see that there is no savings at all in terms of interest paid out for the life of the loan.

If you set up a consolidated loan with a longer term, this means that you pay interest for a longer period of time and inevitably will end up paying more interest on the consolidated loan. So what is the advantage to student loan consolidation? The key is the timing of the consolidation.

Interest rates on new federal student loans first disbursed on or after July 1, 2006 have a fixed interest rate of 6.8%. Federal student loans disbursed before July 1, 2006 will remain variable interest rate loans. The interest rate for these loans will re-adjust every July 1 based on the results of the 91-day Treasury Bill Auctions. So if you took a loan out before July 1, 2006 and you consolidated your loans before this date, this was a wise choice because you locked in a lower interest rate. You only want to consolidate if you have a variable interest rate loan because consolidated loans have a fixed interest rate, and it would be advantageous to lock in a lower interest rate through consolidation before a rate hike takes place. If the interest rate is expected to drop, you should wait until this time and then consolidate. So timing is everything.

There are other less important advantages to student loan consolidation, such as making it more convenient to pay by having one bill, and reducing the amount you pay per month by extending the length of the term for the new loan. But remember, if you extend the term length of the loan, you will end up paying more total interest. The whole objective to student loan consolidation is to reduce the cost in terms of your repayment, not to increase your cost. Since timing is everything when it comes to student loan consolidation, it is important that you keep a prudent watch on the interest rate, especially as July 1 approaches.

When consolidating, remember that just about any lender can do the consolidation, and if you are not satisfied with the terms, you can use the Federal Direct Consolidation Loan Program. Also, do not use a loan broker, simply because they will charge a fee. A student loan consolidation can be completed by talking with your local lender. Using a student loan broker defeats the purpose of reducing your cost for repayment of your student loans. By simply going to websites like this one and others can result in you gaining enough knowledge in order to make the right decision for your student loan situation.

Student Loan Consolidation Rate - Conclusion

The student loan consolidation rate in terms of interest is probably the most important factor when deciding if student loan consolidation is right for you. Setting up a consolidation does not automatically result in a savings of interest paid out in terms of repayment. The timing of the consolidation is the most important factor to consider. If you decide to consolidate, make sure you completely understand the terms of the consolidated loan, and if you are not satisfied with the terms, simply do not consolidate or look else where, such as the Federal Direct Consolidation Loan Program. The following is the most current news about student loan repayment plans, federal interest rate, and basically any information which is significant to the borrower who needs to pay off student loans.

Student Loan Consolidation Rate - Videos


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Student Loan Consolidation Rate - News

student loans - Google News
student loans - Google News
©2008 Google
student loans - Google News

Attorney General will talk about college loan fraud - News 10NBC


News 10NBC

Attorney General will talk about college loan fraud
News 10NBC, NY - 1 hour ago
Last year, he unveiled the first student loan reform law in the nation. It requires colleges and lenders to adhere to a strict code of conduct.
NY AG, student loan firms talk settlement Long Island Business News (subscription)
all 3 news articles

Private student loans get scarce - The Tennessean

Private student loans get scarce
The Tennessean, TN - 4 hours ago
In recent months, several large lenders have stopped providing private student loans, stranding families that were counting on private loans to cover some ...
College financial aid pleas on rise Albany Times Union
all 2 news articles

State Secures More For Student Loans - WEEK-TV

State Secures More For Student Loans
WEEK-TV, IL - 12 hours ago
State officials announced Sunday that eight Illinois credit unions are providing 100 million-dollars in college-student aid. They add it will fill a void in ...
Ill. credit unions help with college aid Chicago Tribune
Ill. Credit Unions Help With College Aid CBS2 Chicago
Credit unions to help with college aid Chicago Daily Herald
all 20 news articles

Counseling on Student Loans Now May Ease Pain Later - New York Times

Counseling on Student Loans Now May Ease Pain Later
New York Times, United States - Sep 6, 2008
TREAT THIS LIKE A CLASS Student loans, and the financial aid process in general, are incredibly complicated. There are several types of loans, ...
Student Loans Under Fire Forbes
College Needn’t Bankrupt You Newsweek
all 39 news articles

Graduation, then first job, now it’s payback time - TheChronicleHerald.ca

Graduation, then first job, now it’s payback time
TheChronicleHerald.ca, Canada - 3 hours ago
Most student loans are amortized over 9.5 years, and during that time some graduates will convert their student debt to a commercial loan. ...

It's a hard time to get new credit - San Francisco Chronicle

Seattle Post Intelligencer

It's a hard time to get new credit
San Francisco Chronicle,  USA - 3 hours ago
The result is that all kinds of loans, from mortgages to student loans to credit card debt, have become scarcer and more expensive. ...
Video: US takes over mortgage giants - 08 Sep 08 AlJazeeraEnglish
all 5,928 news articles

Young couple should pay off big student loans - Globe and Mail

Young couple should pay off big student loans
Globe and Mail, Canada - Sep 6, 2008
The biggest is debt service charges of $6155 a month, most of which goes to pay off student loans. That's 57 per cent of their monthly after-tax income. ...

Student loan availability squeezed - The State

Student loan availability squeezed
The State, SC - Sep 6, 2008
But the ongoing credit crunch has caused some lenders to stop making student loans and to raise lending standards — forcing many students and their families ...

Explore student loan repayment options - Grand Forks Herald

Explore student loan repayment options
Grand Forks Herald, ND - Sep 6, 2008
Federal student loans offer a financial lifeline for many students, who might otherwise have a difficult time paying for a college education. ...

MRU Holdings, Inc. Pauses Origination of Student Loans - MarketWatch

MRU Holdings, Inc. Pauses Origination of Student Loans
MarketWatch - Sep 5, 2008
is pausing the origination of private student loans, available through its MyRichUncle(R) website, www.myrichuncle.com, and its private label partners, ...

Student Loan Consolidation - Google News
Student Loan Consolidation - Google News
©2008 Google
Student Loan Consolidation - Google News

New York Plans to Sue Student Loan Company - New York Times


New York Plans to Sue Student Loan Company
New York Times, United States - Sep 4, 2008
As of 2006, Goal was one of the top 10 companies in the country in loan consolidation, according to Student Marketmeasure, a company in Bethesda, Md., ...

Federal Student Loan Efforts Finding Fair Share of Takers - Financial-Planning.com

Federal Student Loan Efforts Finding Fair Share of Takers
Financial-Planning.com, NY - Sep 3, 2008
(In April, Student Loan Corp., which is majority-owned by Citigroup Inc., stopped making federally guaranteed consolidation loans. ...

Struggling Lenders Continue to Suspend Federal and Private Student ... - MarketWatch

Struggling Lenders Continue to Suspend Federal and Private Student ...
MarketWatch - Aug 19, 2008
... private student loans, and information on federally guaranteed parent and student loans, student loan consolidation programs, and college savings plans. ...
Loans for college students harder to come by Arizona Republic
State stepping in as banks bail out of student loans Salt Lake Tribune
all 27 news articles

Capturing the Youth Vote: McCain, Obama Target Concerns About ... - MarketWatch

Capturing the Youth Vote: McCain, Obama Target Concerns About ...
MarketWatch - Aug 29, 2008
Worries persist among college students and their families about the stability of the of federal student loan program, as struggling lenders continue to ...

Call Kurtis: Consolidated Loans - CBS 13

Call Kurtis: Consolidated Loans
CBS 13, CA - Sep 2, 2008
They said that she did not qualify for a deferment plan, which was outlined in a loan consolidation agreement that she signed. Rrobert Shireman with the ...

Credit squeeze hits college students, families - MSNBC

Credit squeeze hits college students, families
MSNBC - Aug 18, 2008
Now, with the credit markets still tight, many private lenders have retreated from the student loan market altogether. Sorting through the maze of student ...

Student loan 'fix' - The Union Leader

Student loan 'fix'
The Union Leader, NH - Aug 23, 2008
... had to suspend its non-federal alternative loan program as well as its federal consolidation loans. But the "Ensuring Continued Access to Student Loans ...

How to Go to Business School for Free - RedOrbit

How to Go to Business School for Free
RedOrbit, TX - Sep 5, 2008
The average debt for a student attending one of the top 20 business schools hovers around $80000, according to Graduate Leverage, a student loan ...

Are There Different Debt Consolidation Programs? - Best Syndication

Best Syndication

Are There Different Debt Consolidation Programs?
Best Syndication, CA - Aug 15, 2008
If you want to understand Debt Consolidation Loans and Student Loan Consolidation thoroughly you can visit her site http://www.badcreditloanservices.com.
How to Consolidate Student Debt to Save Thousands: Combined or ... Best Syndication
all 15 news articles

Bankruptcy And Student Loans Do Not Always Go Together - 3x24 - Your Newspaper and News Magazine

Bankruptcy And Student Loans Do Not Always Go Together
3x24 - Your Newspaper and News Magazine, Germany - Aug 27, 2008
One option is to secure a loan with lower interest rates and lower payments to pay off their student loan debt. Consolidation isn’t the only way to get out ...

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