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goodkiller said: "Pardon my ignorance, but I just heard about this rate hike that starts at midnight tonight. Now since I know nothing about student loans.. my questions are:
1. Is "consolidation" just a term for changing your student loan (if it's a variable APR rate) into a fixed rate? I though consolidation was just combining a bunch of loans into a one-rate loan?
2. The impression that's given out there is that all student loans must be "consolidated" at some time.. I don't get this?"
94B10 said: "I consolidated my student loans and I think the rate was at 4% and it hasn't changed. Good thing about consolidating is that the rate increases don't affect you.
I probably didn't answer your questions, but CB has a student loan forum that is very helpful and they are great about answering questions.:)
94
[QUOTE=goodkiller]Pardon my ignorance, but I just heard about this rate hike that starts at midnight tonight. Now since I know nothing about student loans.. my questions are:
1. Is "consolidation" just a term for changing your student loan (if it's a variable APR rate) into a fixed rate? I though consolidation was just combining a bunch of loans into a one-rate loan?
2. The impression that's given out there is that all student loans must be "consolidated" at some time.. I don't get this?[/QUOTE]"
smrtnsase said: "Consolidation helps alot of students that need a lower monthly payment. When you first take out a federal student loan it has a 10 year term at a variable rate. When you consolidate you can extend the term out as far as 30 years (all depending on loan bal.) to lower the monthly payments and it also locks in a fixed rate so when rates change it has no effect on the consolidation. Most consolidations have a no prepayment penalty so that is a plus. Interest rates all depend on date of disburcement (and the year you consolidate) so you could have diffrent loans that carry diffrent interest rates.The Federal Goverment changes rates every July 1st. The way consolidation works is that you combine all loans and get a weighted average. For example:
$3000 Taken out 6/1997 7.94%
$5000 Taken out 8/1998 7.14%
$8000 Taken out 6/1999 7.14%
Total $16,000
(Fixed Rate consolidation) 7.375% This would be the weighted average
180 Month term (based on loan amount)
Payments of 147.19 per month
$26,493.79 after all is said and done (on a 16,000 loan)
These figures are based on the NEW rates as of 7/1/06
Just to give you an idea of how much $ was saved if you Consolidated at the old rates (between 7/01/05-6/30/06
$3000 Taken out 6/1997 6.10%
$5000 Taken out 8/1998 5.3%
$8000 Taken out 6/1999 5.3%
Total $16,000
(fixed rate consolidation) 5.5%
180 month term (based on loan amount)
Payments of 130.73 per month
$23,532 after all ia said an done (on a 16,000 loan)
I know this is a long post but I hope it will help someone. Yeh for all those who locked in rates with in the last 2 years you have the lowest rate ever offered on student loans. For all those that did not well you are now paying more $$ so dont be shocked when the monthly payments go up and they will. :eek:"
smrtnsase said: "O by the way no you do not HAVE to consolidate but it is a pretty good idea to save $$"