Best rates for consolidating college loans
Best rates for consolidating college loans - colunga dating
We start by discussing the basics of student loan consolidation and refinancing, and comparing the benefits and drawbacks of federal and private consolidation loans.
With a private consolidation loan, a private lender writes a new loan that pays off the old loans.
The basics of federal and private consolidation loans are outlined below.
How Federal Consolidation Loans Work Borrowers can combine multiple (at least two or more) federal loans into a single Direct Consolidation Loan (this is the only federal consolidation loan available).
To be eligible, borrowers must have a clean credit history and a “good” FICO credit score (“good” is 670 and above according to FICO).
Borrowers with a poor credit history may still be able to qualify if they can secure a cosigner with good credit.
A federal student loan consolidation calculator provided by US Bank was used to calculate the weighted average.
Borrowers who are out of college or are attending classes less than half-time can consolidate their federal student loans.
The new interest rate can be lower or higher than the weighted average of the old loans and can be fixed (the interest rate won’t ever change) or variable (the rate changes based on the market conditions).
Private and federal loans can both be refinanced with a private consolidation loan.
The following table illustrates how a weighted average works.
In this example, there are three students that each have three loans.
Because the interest rate is a weighted average and rounded up, borrowers won’t ever save money on interest by opting for a federal consolidation loan unless the loans are pre-2006 and have a variable interest rate.