Consolidation of fixed loan rate for students

Most students going in for a funding of their education prefer to do so at a fixed rate. Instead of worrying about the floating rate options which may fluctuate wildly, it makes sense to go in for an option which is fixed at a particular interest rate so that the student can plan better. Since the interest rate is fixed, the monthly payments are also fixed, and that is an added bonus.

With fixed rate loans there is another advantage and that is the option to consolidate at a lower rate!

Consolidation of fixed loan rate for students is today available in multiple ways – through government backed funding companies, through private / public partnerships, and through complete private finance. According to law, however, there can only be one consolidation done through a private agency, and once that is done, if the candidate needs an additional consolidation, there can only be one granted by the department of education.

The simplest advantage of the consolidation of fixed loan rate for students is the lower interest rate chargeable on the consolidated loan. Apart from the convenience of dealing with a single loan company instead of multiple ones, there is the savings incurred on the lower interest rate loan. Normal government backed loans today are available at an interest rate of about 6.8%, and that is the full charge. If you are from a family which does not meet the minimum income criteria set by the federal government, you will have a lower interest rate to pay, and that might even be as low as about 3-4%. According to the scale, even the PLUS interest rate is lower than what most of the students pay to private financers anyway!

But then not all consolidation of fixed loan rate for students is undertaken by the department of education. Statistics show that about $ 65 Billion worth of loans got the benefit of federal funding or federal guaranteed funding in 2007-08. There are many more students in this country, and all of them have had to go through private channels to get their education covered. And unlike what a lot of people say, private financing does not necessarily mean cut-throat interest rates, and horrible treatments. There are a lot of companies which are in the field of educational financing to fulfill their social responsibility, and the interest rate they charge is comparable with what most banks would charge for a similar period. If we are talking about loan consolidations, private lending is right up there with the top channels of financing, and the interest rate chargeable for consolidations is much lower than that of fresh loans.

The good thing about consolidations is that it need not be only with the federal financing agency your college has a tie up with. If there is a different company which is offering a better deal, you are free to take it, and no one can object. If you have a large amount pending on your educational loan, consolidation will probably be the best thing for you. Consider it!