Omario asked:
I ‘m writing because my wife and I need to know the best way to consolidate her college loans. My wife graduated in Dec. and its time to pay the piper. She has some low interest Sallie Mae loans but the problem is the remainders of the loans are unsubsidized Stafford loans with Citibank. $26,000.00 at an average 6.8%. The monthly payment will be difficult for us to make. We’d like to consolidate but don’t know where to look for the lowest rate. I know some bills in congress are aimed at lowering these rates. We have received solicitations from different loan brokers but they don’t leave me feeling like they’re looking out for us. Is it worth it to consolidate now if we’ll only be switching lenders when (if) the bill in congress is past? Where can we find information on student loan consolidation rates in an unbiased, consumer advocate atmosphere? Thanks for your help
I ‘m writing because my wife and I need to know the best way to consolidate her college loans. My wife graduated in Dec. and its time to pay the piper. She has some low interest Sallie Mae loans but the problem is the remainders of the loans are unsubsidized Stafford loans with Citibank. $26,000.00 at an average 6.8%. The monthly payment will be difficult for us to make. We’d like to consolidate but don’t know where to look for the lowest rate. I know some bills in congress are aimed at lowering these rates. We have received solicitations from different loan brokers but they don’t leave me feeling like they’re looking out for us. Is it worth it to consolidate now if we’ll only be switching lenders when (if) the bill in congress is past? Where can we find information on student loan consolidation rates in an unbiased, consumer advocate atmosphere? Thanks for your help
Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. (10 years for less than $7,500; 12 years for $7,500 to $10,000; 15 years for $10,000 to $20,000; 20 years for $20,000 to $40,000; 25 years for $40,000 to $60,000; and 30 years for $60,000 and above.) The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid is increased.
–house.blogspot.com/2008/03/loan-consolidation.html
In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. In effect, the shorter-term loan is being extended to 10 years. The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease. The interest rate on consolidation loans is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.
If a student consolidates their loans before they enter repayment, the interest rate used is the lower in-school interest rate. Thus, although the rounding up of the weighted average can potentially cost the student as much as 0.12%, a student who consolidates before entering repayment can save as much as 0.6%, a substantial net savings. (The in-school interest rate is 1.7% plus the 91-day Treasury bill rate from the last auction in May. During repayment, the interest rate is the 91-day T-bill rate plus 2.3 %.) This loophole has been confirmed by an excerpt from the Federal Register and direct correspondence with the US Department of Education. Additional details can be found in the interest rate loophole section.
Good Luck…
Left by Manju on April 20th, 2010