Have you heard of a graduate having five to six student loans? It’s possible, and it’s happening. Sometimes a student can have multiple loans with several loan companies. When that happens, having reasonable student loan consolidation rates could be the only thing that saves them from the amassed college loan debt. Thousands of people consolidate student loans in the hope that they can get repayment relief.
As it stands, the student loan consolidation program is one of the sure ways to get relief from student loans. It helps student borrowers to gain control of their vast debt loans and help them formulate a way to plan a sufficient budget and repayment method.
If you are a recent college graduate student, hopefully, the new career will provide you with a steady monthly income. However, when you begin your career, there will be other things, such as rent, grocery bills, and other monthly bills to consider. If you consolidate your several loan debt under a loan program, you’ll not feel much financial burden on your monthly payments.
Student Loan Consolidation Rates
The government created the student loan interest rates to make it easier for students to manage their finances. When you are a fresh graduate, the last thing you want is enormous debts and high-interest rates.
Most students are searching for the lowest possible student loan consolidation rates to make their finances easy. As such, the primary focus is to search for a student loan consolidation program that offers, if not the lowest possible, manageable interest rates. It sounds simple, but it doesn’t always happen that way. One thing is for sure; there’s substantial due diligence required of you to make the best choice.
In this guide, we will consider the student loan interest rates in the two primary student loan consolidation programs and how to make your decision.
Let’s dive in.
Student Loan Consolidation
Student loan consolidation is a program that helps college students to manage their loan repayments, and if possible, less costly. It combines several student loans into one consolidation loan. When that happens, you only make one payment to all the several loan lenders each month. Usually, this program alone can reduce the amount of stress, fees, and wasted time associated with your loan repayment.
However, consolidating or refinancing your loan can also offer the chance to sign up for different repayment plans and have a low-interest rate on your student loan debt. There two ways to consolidate student loans that can help combine your multiple loans into one:
- Direct Loan Consolidation
- Private Loan Consolidation ( or Student loan refinancing)
We recommend taking considerable time to decide which program is best suitable for you. When you take the time, it means you are taking charge of your financial life towards a stable and healthy future. To begin, you can talk to your credit counselor and know how to negotiate a deal with your loan lenders and officials. If you work with an experienced and professional credit counselor, you can get the right decision and come out of debt as soon as possible.
Student Loan Consolidation Rates
The student loan consolidation rates determine the cost of your student loans. You can find the fixed rate and variable rate loans with a credible student loan refinance. Remember that, with the variable rate, the interest rate on your student loan can rise and fall depending on the market rates. But if it’s a fixed rate, it will stay stable throughout the loan repayment period. The variable rates are cheaper compared to the fixed-rate, but in a situation where the interest rate rises, it may cost you more in the future.
Direct Loan Consolidation has a fixed rate. Which means, regardless of the interest rate on the market, you’ll always have a fixed rate. It’s a huge benefit because you don’t have to worry about the interest rate rising on the market due to inflation or other economic factors. However, even though it’s fixed, there are times the banks can change your student loan interest rates, so you need to stay alert.
How Student Loan Consolidation Rates Work
The loan consolidation rates work differently based on whether you have a federal or a private loan. For federal loans, every student borrower has the same interest rate in a particular year. With private loans, having a high credit score qualifies you for low-interest rates. In other words, high credit scores equal low-interest rates while low credit scores amount to high-interest rates.
Student Loan Consolidation Rates: Private Loans
Private student loan consolidation combines your several loans, whether federal, private, or both, into one private student loan. If the new loan has a low-interest rate, you’ll be able to save money. But your credit history will determine if you get a low-interest rate. Your income, job history, educational background, and credit score all play a role in determining your interest rate. You need to acquire a minimum credit score of 600 to be eligible, and rates are from about two percent to over and above nine percent.
You can consider refinancing when you have:
- A stable career
- A good credit score of about 690 or more
- Have made loan repayments on time after graduating
- Get a co-signer with the above characteristics, if you don’t qualify
When you acquire a credible student loan refinance, it means you lose any consumer benefits related to federal loans. It includes losing the chance of getting loan forgiveness and other repayment programs.
Similar to the federal government, private loan companies provide the option to consolidate your multiple loans into one single loan. Which means you can’t transfer your private loans to federal loans. But you can combine both your private and federal student loans with a private creditor. Ultimately, the goal is to get an interest rate low enough for you to afford your loan repayments.
The consolidation calculator can help you compare your monthly payments using three different categories: income-driven repayment plans, private loan consolidation, and federal loan consolidation. If a credible student loan finance is the best idea, you can proceed with private student loan consolidation.
Federal Student Loan Consolidation Rates
There is no credit requirement for direct or federal loan consolidation, but it offers you the opportunity to combine your numerous loans into a single loan, with low payments. However, this offer is for only federal loans, and it doesn’t reduce the interest rate. In other words, the interest rates are fixed. You can opt for the federal loan consolidation with the following consideration:
- If you have a student loan default and want to get back on your feet
- If you’re going to combine your loan payments into a single payment
- When you need to consolidate to qualify for Public Service Loan Forgiveness or income-driven repayment plan.
When there’s a federal consolidation loan, the federal government exchanges them with a direct consolidation loan. You are qualified for the program if you graduate, or leave school. The federal consolidation loan is entirely free. Beware of companies that require you to pay them money to consolidate your loans for you. They are scammers.
After you consolidate your federal loans, your new standard interest rate will become the previous interest rates weighted average, summed up to the 1/8 of one percent. For example, if your average rate is 6.15%, then the new interest rate becomes 6.25%. The weighted average is what your total loan debt costs you.
Also, your new federal long term is between 10 to 30 years. The repayments usually begin within 60 days from your first loan consolidation disbursement. It’s based on the overall balance of your student loans, and other factors.
The bottom line is that student loan consolidation can be a great way to reduce your interest rate and clear your loans quicker. But the challenge is deciding which loan consolidation program to take. One wrong decision can end in years of repaying debts. A credible student loan finance can provide you with low student loan consolidation rates if you have high credit scores. The federal and private loan consolidation can be of merit to you, depending on your financial capacity and financial information you get. We recommend that you simply don’t agree with the first option that is offered to you. Be certain that whatever option you choose, it has a low-interest rate to help you clear your loan debt faster. Always look out for the people who will take their time to share with you in-depth financial advice on what to do, especially how to manage several loans.