Student loan consolidation is just one piece of that giant debt puzzle for students to solve when they graduate from college.
In addition to federal and private student loan debt man also carry credit card debt, department stores balances, have medical bills, legal fees, personal loans, and may already have a loan or two in collections. That’s why after you consolidate your students loans you may want to consider consolidating any and all remaining debt into one easy payment. It’s conveinent and more affordable.
The cap or ceiling on your consolidated loan varies between federal and private.
Federal: If you have a federally consolidated loan the rate will never exceed 8.25%. The vast majority of students fall well beneath this 8.25% threshold however. Your consolidated interest rate is a fixed rate based on the weighted average of the interest rates on all the loans you consolidate, rounded up to the nearest one-eighth of 1 percent. The average rate these days is around 6-6.8%.
Private: Private loan consolidations vary from lender to lender, but generally don’t have a cap in order to protect themselves from the fluctuating market. Ask your consolidating lender for more details.
Did you know if you’ve previoulsy consoldiated your federal loans with a private lender (such as Sallie Mae) that you can reconsolidate them again with the Direct Loan Center? That’s right. The Direct Loan center will not only take your federal loans but they’ll extend your deferral time by another three years. Your interest rate will remain the same throughout the consolidation process, but that refreshed defferal time may be critical to some students.
The quick answer is check with your consolidating lender as benefits vary, but generally speaking there is a wide array of potential benefits that come equipped with private student loans both pre and post consolidation; benefits that distinguish private student loans from private personal ones. Some notable benefits may include:
- 12 month Economic hardship
- 12 month temporary disability
- Up to 36 months for all active-duty military personnel
The borrower benefits that once existed in the world of consolidation are now gone. It’s as if Back to the Future’s resident tough guy Biff Tannen told them to make like a tree and leave (although he used to screw that line up). Regardless, those benefits listened and bolted out of down quicker than Bruce Willis’ character in Pulp Fiction. They are now no where to be found. You can turn over as many stones as you like, but all you’ll find is some moist soil and a few earthworms. So where did they go?
The attractive benefit packages left when all those companies offering consolidation left the market due to the recession. When several companies were in the business of consolidating federal and private loans it was common to hear a borrower receiving a 1% discount after 24 on time payments and a .50 ACH discount on top of that. Now, .25 ACH is basically all that’s available, at least on the federal side.
The rates and benefit plans available to you are all linked to timing. If you graduated in the late 90’s your federal interest rates were consolidated at around 8%. In 2004-05 you were in the 3.5% range, with benefit packages taking you well under 3%. Today many students are stuck around 6-6.8%.
If you have older brothers and/or sisters who graduated a few years ago they will probably tell you what a wonderful rate they got. They are not lying. They just happened to be in the right place at the right time.
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Student loan consolidation is just one piece of that giant debt puzzle for students to solve when they graduate from college.
