Student Loan Rates Are At A Low When All Factors Are Considered

Getting money from a bank or other lending institution may be a bit more costly now than ever before, but the interest rates themselves are still pretty attractive when compared to other credit instruments, such as credit cards and some home equity loans. In fact student loan rates are a better buy now than many think. When student loan rates are low as they are now then recent graduates should consider consolidation of loans into one with a new and lower rate.

If you are interested in a low student loan rate take a look at the Stafford Loan. The rate here is 5.3 percent, which is higher than the lowest rate student loan rate last year at 3.37 percent. The biggest source of student loans in the country, these rates are lower than the PLUS program loan, Parent Loan for Undergraduate Students. These loans are now at 6.1 percent from a 4.17 low.

Student Loan Rate and Consolidation

If you are considering consolidation of student loan debts do so before new rates take effect. You do have a grace period of six months after graduation before you have to begin making payments on a student loan, and that six months can roll by fast, so make your plans now.

Of course there is one negative aspect of consolidating during the grace period. The borrower has to begin the payment process right away. However if the student loan rate is lower on reconsolidated loan then the amount that you save in the long run will more than offset the small inconvenience of beginning your payback a few months early.

With a federal consolidation loan, your lender simply pays for the balance of all the loans. A new loan is then issued to the borrower at a new student loan rate. This rate will stay with you for the life of the loan, or until paid off.

How It Works

Your student loan rate on a consolidation loan is a bit complicated. The bank looks at the weighted average of those rates on your loans, then rounds up to the closest 1/8 of a percentage point. Don’t worry, the rounding is capped at 81.25 percent, but everyone’s final rate is different.

A common reason folks choose to consolidate is the need for a bit of extra space from month to month. Consolidating can mean lowering payments by almost half, and this can stretch out ht repayment period significantly, helping the borrower to get on his or her feet financially.

Check out your student loan rate and see if you can benefit from consolidation.