Student Loan Consolidation Interest Rates

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Student Loan Consolidation Interest Rates
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• Lowering interest rates have made student loan
  consolidation interest rates an option being
  considered by many people. Nearly 80 of students
  have some type of student loan by the time they
  graduate and the average loan for a student is
  10,000. For many students and parents, education
  loans have come from several sources, have
  varying interest rates, and have higher payments
  that one is comfortable with.

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• Education loans fall into two categories, Federal
  education and Private education loans. When a
  student is considering consolidation it is
  important to keep these categories separated. The
  method for calculating consolidation interest
  rates for federal education loans are strictly
  regulated by the government. The education loans
  provided by private lenders do fall under the
  same restrictions and requirements and can vary
  greatly depending of the lender gave the loan.

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• Student loan consolidation interest rate for
  education loan are calculated by taking the
  average rate of all of the loans and rounding up
  to the nearest 1/8. The loan, then will fall
  somewhere between the highest interest and the
  lowest interest. The maximum rate is 8.25.

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• There are some instances when an individual with
  a PLUS student loan will be able to receive a
  lower rate by consolidating. The cap on a PLUS
  student loan is 8.5. However, when the PLUS is
  consolidated, the cap is 8.25. By consolidating
  the PLUS loan a student can save 0.25. This is
  called the PLUS Loan Loophole.

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• When private education loans are consolidated an
  individual will want to compare the interest
  rates and fees of different lenders. These are
  calculated just like a mortgage loan would be.
  Lenders calculate these loans on either the prime
  rate plus margin for the borrower and co-signer
  or the LIBOR. They usually charge between 1 and
  5 origination fees depending on the credit of
  the borrower. This fee is included in the loan.

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• Deferred interest will also affect the total of a
  consolidation loan. Lenders usually capitalize
  the deferred interest of the original loan and
  include that in the consolidation. There also be
  discounts and benefits that must be paid back to
  the original lender when the loan is consolidated.

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• The benefit of consolidation is that all of a
  person's loans are in one location and the same
  interest rate is being paid. In addition, the
  repayment period is often longer than the
  original repayment period so the monthly payment
  will be lower. However, it is important to
  consider what the final cost of getting a
  consolidation will be compared to maintaining the
  original loan. It is also important to talk to a
  professional who can talk about the options that
  are available to help an individual find the best
  interest rates that are available.

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