Student loan consolidation rates are often among the very top concerns of someone who finds themselves under the load of numerous debts and loans they’ve taken out to get an education.
While I won’t argue that it shouldn’t be a major concern, before I go on, I do want to simply point out that the monthly payments, the length of the loan and any terms or fees should also be factored into the decision to consolidate your student debts into a single loan.
Many factors figure into student loan consolidation rates. Is the loan a private loan or is it backed by the Federal Government? Generally you don’t want to combine these as the terms and rates of federal loans are much better than private loans. Which Federal loans you have, or are applying for are also a factor.
In the past, a Stafford loan, for example, had an adjustable formula to determine it’s rate. It was tied to the treasury bill, but starting in 2006 a rate of 6.8% became the fixe rate. In today’s climate, many providers of loans will accept a lower margin on the rate than the Federal government entitles them to. They will offer a lower rate in the hopes of attracting your business. It’s impossible to give exact figures as student loan consolidation rates constantly change, just remember that it pays to do your homework and shop around.
Also be aware that your credit history can be a big factor in many, but not all loans. Some lenders will offer a break or incentive based on a better credit score. If this is an issue for you, you may want to look for lenders like Stafford that do not base student loan consolidation rates on your credit history. These loans tend to be based on conditions of need rather than credit score and ability to pay it back… for many this is their best bet.
Another factor or issue to consider is the “origination fee” that may also accompany the issuing of a student loan. Some institutions may charge up to 4% of the loan total, but in a competitive market may will offer a lower rate. In the case of Federal loans, a portion of this fee goes back to the government to reduce the over all cost of loans. Once again, it pays to shop around as these rate can vary greatly.
Beyond the upfront terms and fees, you’ll want to consider what many would call “the small print” in student loan consolidation rates. What sort of fees are charges if you make a late payment? What is the grace period before a collection fee is imposed? If you have a history of struggling with making payments on time, or find yourself in unfortunate circumstances financially these issues can be very important to thing about.
Remember that these are not grants and must be paid back. Failure to do so could have real and significant consequences for your financial future. This could affect not only the rates of your student loans, but the rates of any credit you may wind up needing as you progress through life.