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Author Topic: Student Loan Cosolidation Questions  (Read 1868 times)

xferlawstudent

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Re: Student Loan Cosolidation Questions
« Reply #10 on: March 26, 2008, 07:36:04 PM »
The rules are different for loans prior to 1998.  Also, if the weighted average of your loans was 3% then that's what you got.

"
Interest rate

The interest rate for FFEL and Direct Consolidation Loans is set according to a formula established by federal statute. The fixed rate is based on the weighted average of the interest rates on the loans at the time you consolidate, rounded up to the nearest one-eighth of a percent. The interest rate does not exceed 8.25 percent. The consolidation rate is fixed for the life of the loan, which protects you from future increases in variable rate loans but prevents you from benefiting from future decreases in variable rates.

Borrowers with Stafford Loans issued on or after July 1, 1995, can reduce the consolidation rate by up to half a percentage point or more by consolidating before the end of the grace period.

If a borrower wanted to consolidate only Direct or FFEL Stafford Loans made between July 1, 1998 and June 30, 2006, the 2007-08 Consolidation Loan interest rate for loans that have entered repayment would be 7.22 percent. To consolidate those same loans during a grace or deferment period, the rate would be 6.62 percent. If a borrower consolidated PLUS Loans made between July 1, 1998 and June 30, 2006, the interest rate for the resulting PLUS Consolidation Loan would be 8.02 percent.

The interest rate you would receive, however, depends on which federal student loans are being consolidated. For example, your rate would be higher if you consolidated a 5 percent Federal Perkins Loan along with a 6.62 percent Direct or FFEL Stafford Loan"

From: http://www.studentaid.ed.gov/PORTALSWebApp/students/english/consolidation.jsp?tab=repaying


1LMan

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Re: Student Loan Cosolidation Questions
« Reply #11 on: March 26, 2008, 07:45:43 PM »
All I know is my FEDERAL loans are under 3% and consolidated and I consolidated in 2003.

xferlawstudent

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Re: Student Loan Cosolidation Questions
« Reply #12 on: March 26, 2008, 08:06:01 PM »
Well, dude read the f-ing rules.  You say its not a good time to consolidate, but clearly you have no clue what you are talking about.  If you had loans with a weighted average of less than 3% good for you, but I cannot shop around to get this.  The rates are fixed.

1LMan

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Re: Student Loan Cosolidation Questions
« Reply #13 on: March 26, 2008, 09:17:44 PM »
Dude, I got the consolidated rate by waiting until it hit under 3%.  You can argue with me like an as#hole or just take it for what its worth.  I don't know the "rules" nor do I care about them.  All I know is that my rate is under 3% and I have all federal loans.

Still bitter about that TTT?

John Galt

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Re: Student Loan Cosolidation Questions
« Reply #14 on: March 27, 2008, 09:24:45 AM »
Stafford loans used to be variable, but when the Dems took over congress they switched them to fixed. Hence, undergrad loans could be locked in a low interest rate, under 2% was the lowest, but recent ones (starting in sept 2006) are fixed rate and are not going to come down.

Variables aren't going to get much lower, the Fed rate is pretty low already. Interest rates are not going down accordingly, however, because lenders have been getting burned on loans (student and home), so they are not lowering rates as low as they did. 

1LMan

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Re: Student Loan Cosolidation Questions
« Reply #15 on: March 27, 2008, 09:30:33 AM »
Interesting, so what does that mean for federal loans in the future?  That the rates will always be high?  That sucks, that essentially would make a federal loan less beneficial than a private loan.

John Galt

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Re: Student Loan Cosolidation Questions
« Reply #16 on: March 27, 2008, 09:46:05 AM »
I am not sure of the number for sure, but the rates for the first year were 6.8%, I think. Then they get lower over the next 5 years and bottom out at around 3.5%, then go back up to 6.8 in 2012%.

In terms of consolidation, the rate is generally "fixed" as weighted average of all your loans. However, the incentives offered by the lender differ, sometimes greatly. Some lender offer steeper discounts for things like autopay and making x number of on time payments. Some lenders reserve the right to cancel the incentives at their leisure or sell your loan to a lender who does not habe to honor them. I don't want to sound like an infomercial for graduate leverage, but I looked into various lenders and found the deal that they negotiated to be the best.

On a side note, Congress paid for fixed rates (which at the time were lower than the variable rate) by reducing subsidies paid to lenders who write these loans. A side effect to cutting the subsidies (and the turn in the economy)is that private lendeers who offer stafford and private loans (like access group) are less willing to write nonguaranteed private loans, making it harder for students to qualify for a private loan, if needed. To be a Friedmaniac for a moment, if congress had let the rates remain variable and tied to the fed rate, they may be lower than the fixed rate they are set at now.    

John Galt

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Re: Student Loan Cosolidation Questions
« Reply #17 on: March 27, 2008, 09:49:30 AM »
federal stafford loans will probably still be more beneficial, considering that part is subsidized and the fixed rate offered by the stafford loan is still better than a student with little credit history and a bunch of loans already will get from a private lender.

Private loans MAY be better than a PLUS loan IF the borrower has great credit (or a cosigner with great credit) and can get a good rate, but is suspect in 95% of the cases a PLUS loan would be better than a private loan as well. 

1LMan

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Re: Student Loan Cosolidation Questions
« Reply #18 on: March 27, 2008, 09:59:03 AM »
So what will the average rate be over a 10 year period?  Essentially, what you are saying is they decrease, then increase, each year automatically?  What happens in 2012?

This seems ludicrous.  What a stupid system. 

John Galt

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Re: Student Loan Cosolidation Questions
« Reply #19 on: March 27, 2008, 10:04:03 AM »
The rate decreases every year until 2011, when it will be 3.5%, then it jumps back up to 6.8% for 2012where it will stay unless congress changes the rate.   

Congress does this because thay have no balls, so they sunset every bill they write, this way they don't have to vote to repeal it in the future. In essence, they can raise the interest rates in 2012 without having to vote for it.