Student Loan Consolidation - Questions Answered

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Student Loan Consolidation

What's a student loan? Well, it's a loan offered to students so they can pay for their professional education. Usually, the interest rates are way lower than other loans (home loans, for instance), and they are often directly issued by the government. Be aware that student grants do exist, which don't have to be repaid.

Student loan consolidation? Was ist das?

A few words about student loan consolidation...

Federal student loans in the US are guaranteed by the US government - that's why they are consolidated differently. Existing loans can be purchased/closed either by a loan consolidation company or by the Department of Education (this depends on the type of loan that the borrower holds).

What about interest rates? They are based on that year's student loan rate, which is based on the 91-day Treasury bill rate (a bit complicated, isn't it?).

You must know that loan rates can fluctuate from current low 4.7% to a striking 8.25% (for federal Stafford Loans) or 9% for PLUS loans.

The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Upon consolidation, a fixed interest rate is set based on the then-current interest rate. Reconsolidating does not change that rate. If the student combines loans of different types and rates into one new consolidation loan, a weighted average calculation will establish the appropriate rate based on the then-current interest rates of the different loans being consolidated together.

Remember, a federal student loan consolidation IS NOT a refinancing, since the loan rates CANNOT be changed. A student loan consolidation DOES NOT incur any fees for the borrower - private companies make money on it by reaping subsidies from the federal government.

Student loan consolidation can be beneficial to students' credit rating, but it's important to note that not all federal student loan consolidation companies report their loans to all credit bureaus.

Student Loan Consolidation - Questions Answered

Student Loan Consolidation

Student loan consolidation? Was ist das?

A few words about student loan consolidation...

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