Student Loan Debt Consolidation

Debt consolidation is replacing more than one unsecured loan, with one unsecured loan or a secured loan with collateral. Yet a student loan debt consolidation is a little different.The main differenceStudent loan debt consolidation is guaranteed by the United States government, where the students’ loans are purchased by the Department of Education or a loan consolidation company. Choosing which to use for student loan debt consolidation, depends mainly on the types of student loans. Consolidation ratesThe rate of the student loan debt consolidation varies, but it greatly depends on the year’s student loan rate, which is decided by the United States government. The rates depend on the Treasury bill (91 days) rate, decided at May’s auction of each calendar year.LimitsThe student loan debt consolidation rates vary from 4.7% to 8.25% for Stafford loans and up to 9% for PLUS loans. The available student loan debt consolidation permits students to use a private lender to consolidate and then they can reconsolidate via the United States Department of Education. This result in a fixed rate interest and any other reconsolidation won’t change this rate. If the student loan debt consolidation includes many loan types, then a weighted average is calculated between the several loans’ interests.BenefitsStudent loan consolidation program will organize student’s finances, lower monthly payments and may lower interest rates. The student loan debt consolidation doesn’t force any fees upon the student, as private companies earn subsidies from the U.S. government for student loan debt consolidation programs. The benefit of student loan debt consolidation is the borrower’s credit rating. The students have to be careful during student loan debt consolidation programs, since all private consolidation companies have to report to credit bureaus. It’s better to consolidate than use credit cards, because of low interest rates.

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