Education forms the base of a student to succeed in future
carrer .To fulfill his aim in life students may opt for consolidation
student loan, available for the students staying in the Federal
states. Such hassle free loans enable the student to complete
his and her education successfully. Studen Loan Consolidation
in the FFELP (Federal Family Education Loan Program) is designed
to provide help to the students paying their Federally Backed
Certain benefits can be opted for consolidating in the FFELP program.:
* Fixed Interest Rate
** Lower Monthley Payments
*** No Pre-Payment Penalties
**** Retain all your federal rights such as Deferment and Forebearance
***** Subsidized portions remain subsidized even after consolidating
****** Forgiveness rights for Stafford Loans are retained.
There is no downside to consolidate such student loans.
Even though the program increses the repayment term from the
standard 10 year term to 15, 20, 25, or 30 years depending
on the balance of the loan. Repayment of the loans in suitable
time helps to prevent prepayment penalties . Maximum repayment
$10,000 - $19,999 (15 years)
$20K - $39,999 (20 years)
$40k - $59,999 (25 years)
$60K + (30 years)
With the introduction of FFELP consolidation program the students are receiving
both financial freedom and flexibility. Moreover, space on the application allows students to fix their ; own repayment term up to the maximum
term of the ; loan balance.
Students should typically consolidate their loans after every time they switch
schools, between any breaks (summer break not included), and whenever enrolled
less than 6 credits. They should also consolidate while in their grace period
to take advantage of the .6 in
school/in grace reduction in interest rate. Most consolidation companies
can save their entire grace period by holding the application until right
before the end date of the grace
period It is advisable to the students to ; mention grace period to the
people with whom consolidation is made.
According to the new legislation passed in June 2006, it possible for students
who only have a single lender can benefit from consolidating. These students will also benefit from a
fixed interest rate even though it\'s not a consolidation in the true sense of
Similiarly, in July of 2006, new Stafford Loans were issued at a fixed rate of
6.8% and Parent Plus Loans at 7.9%. Purkins Loans are always issued at 5.0%. Students with Stafford Loans and Parent
Plus Loans prior to July 2006 had variable rates. The rates were reset
from 5.375% to 7.14% for Stafford Loans and from 6.1% to 7.94% for Parent Plus
The interest rate for a FFELP Consolidation loan is derrived by taking the
weighted average rounded up to the nearest 1/8 of a percent. A consolidation of
variable rate Stafford loans will typically attract a student at 6.625% (in
grace) or 7.25% (out of grace). Some companies offer a 1/4 rate reduction for
signing up for automatic check debit and an additional rate reduction for
maintaining on-time payments for a specified amount of time.
There is a weighted average applicable - an average that considers the proportional relevance of each
component rather than treating each component equally.
Instances on a comparitive study on the average :
$2,000 @ 4%
$5,000 @ 1%
$3,000 @ 10%
Thus a standard average puts you
Now Weighted average calculation:
($2,000 x 4%) = 80
($5,000 x 1%) = 50
($3,000 x 10%) = 300
80 + 50 + 300 = 430/$10,000 = 4.3%
It is easily understandable from the above that ; $5,000 at 1% weighs more heavily on the interest
rate than the other two loans.
If the student had a consolidation set for the exact same ammount of time as
the orriginal loans he/she would pay exactly the same ammount of money if a
weighted average was used.
Thus Consolidating on loans, could certainly help the student. Whle attempting
a call it is essential for students to know that a consolidation
company comes under the federal program and can provide them
with a registered number with the US Department of Education.
* Advice on consolidated rates of student loan
1. A detailed search is necessary before
taking any decision on student loan consolidation rates. It is advisable
to opt a lender who is offering
low monthly rates and provides good facilities.
2. Since a student has to pay differently to a loan provider ,it is better to
get only student loan consolidation only as it will ease all tensions in one
3. At present some federal consolidation loans have a lifetime
fixed rate It\'s best to do research to see what the best
interest rates and term a student is eligible for the loan.
online checking via Internet facilitates to; calculate the
interest rate on a new student consolidation loan based on
the rates of; the currently available student loans. Calculation
procedure incudes rounding up to the nearest 1/8th of a percent
of the weighted average of the interest rates on the eligible
4. Federal consolidation rates can give relief
by extending the payment period up to 30 years. This paves
the way for focusing on the studies of the student effectively
and pay back all the debts after getting a ; good job.
5. School going students can get
loans on low rates under the consolidation stdent loan programme.
6. Owing to the low interest rate,students at present can get a much better all
time low interest rate.Such opportunity was not applicable to earlier students
as they had to pay higher interest on the loan.
Thus with the passage of time,things have made a drastic
change boosting the financial industry in the Federal