Student Loan Consolidation Interest Rates

Think of your rates in these terms. You have thousands of dollars in several student loans, with set or variable interest rates. Consolidating these loans will lower your monthly payments and extent the amount of time you have to repay your loans. Yet despite a significant reduction in the amount of money you have to pay each month, you are also making more payments for a longer period of time, thus you could be paying more interest over the life term of the loan. Without negotiating a good student loan consolidation interest rate, you could be paying a large amount of extra money by the time the loan is repaid. Federal student consolidated loans and private student consolidated loans both require a knowledge of the current interest rates, variable interest rate terms, and the current market. This is because each loan has specific interest rate terms.

Federal consolidation interest rates are based on the weighted average of student loan interest rates and usually offer much lower rates than private loans. Moreover, all federal student consolidation loans are required to start of with the same interest rate, set by Congress each year. Do your homework, know the market and what interest rates will be doing during the time you are considering student loan consolidation. Timing is very important if you want to lock in the best student loan consolidation interest rate. Private student consolidation loans are different when it comes to student loan consolidation rates. Rates vary with the shifting market trends and your rates can be fixed or variable, depending upon the terms of your loan. Furthermore, because private loans are credit based, try to consolidate your loans when your credit score and that of your co-signer is at it highest point, as this can give you a considerably lower interest rate.

The chart below shows the significant saving in interest over the life of a consolidated loan if you negotiated an interest rate difference of just 2%. Notice you not only have a lower monthly payment and save thousands of dollars on interest, but your cumulative repayment cost is also much lower. 

Therefore, when you know what type of consolidation loan you will apply for, your first step towards obtaining the best student loan consolidation rate should be comparing lending companies and/or programs for the very best interest rate.