How Does The Student Loan Consolidation Calculator
Work?
Nearly all graduates don't realize until it's too late
that there is a loophole in the federal student loan consolidation program that allows borrowers to lock in an interest
rate that is 0.60% lower than standard repayment rates. Each year's graduating class has a unique opening to take
advantage of this loophole before it closes after the 6th month following their graduation. There are deadlines for you
should be aware of. You should check to see what's the last chance to lock in your current low interest rate before it
increases. The Student Loan Consolidation Calculator seems to be a calculation of time, money and how you balance
both.
There are a few reasons why you are able to save so
much by consolidating your college loans during the grace period.
The interest on a college loan during its six month
grace period is up to 0.60% lower than when the loan enters repayment status. Add to this the current federal student loan
consolidation rate guidelines that dictate the rate of the new consolidated loan using a weighted average of the current
loan's interest rates. Once college loans are consolidated, the lower repayment rate is fixed for the entire 10 to 30 year
repayment period.
If you overlook the deadline, there are still ways to
save with student loan consolidation. One of the benefits that a lot of people say they enjoy most about consolidating
student loans, is the ability to extend the repayment term from the standard 10 year period, up to as many as 30 years. By
lengthening the repayment period, monthly payments are dramatically reduced. When payments are spread out over a longer
period of time, students will pay more in interest over the lifetime of the loan. But many students say that without this
choice, making the monthly payments on their student loans would be a larger burden than they could shoulder.
By consolidating student loans and extending the
repayment period, you the borrower can keep monthly payments low during the early years of your career. If you choose too,
you can contribute larger payments as your salaries increase in the future. Most lenders don't charge any pre-payment
penalties, meaning the choice about how long it will take to pay back loans is entirely up to the borrower, no matter how
many years they spread out their consolidated loan.
It would be great to have no debt at all, but for most
people this isn't an option. New graduates are juggling cash between buying
homes, launching businesses, and starting a family. While they could pay down their college loan in 10 years by paying
$600 a month, rather than over 30 years at $249 a month, the Student Loan Consolidation Calculator tells me it's worth the
opportunity cost?
For those earning enough to have the best of both
worlds, if you make the choice to pay off college loans sooner might be more beneficial. But others who are forced to make
a choice about how to leverage a tight income must decide what is in line with their vital financial goals. Instead of
being forced to save around the student loan repayment, borrowers can choose a feasible monthly repayment amount, and then
determine the number of years required to repay the loan at that amount using a student loan consolidation
calculator.
PLUS loans, was only for parents of undergraduate
students, are now obtainable for graduate students to fund their own educations as a result of the Higher Education
Reconciliation Act July 1st changes. PLUS loans experienced a rate hike in July, from 6.1% to 8.5% but there is a silver
lining to this cloud through a loophole in the Act.
All consolidated loans now have a cap of 8.25%, a quarter of a percent lower than the rate of the PLUS loan. This means that
parents or graduates that have a PLUS loan will lower their interest rate, if they consolidate. If you are a PLUS loan
borrower you can choose to extend the repayment period like any other federal student loan borrower to lower the monthly
payment, but with this loophole, even if they make no changes to the 10 year repayment period, they will still save money
just by consolidating.
