Student Loan Consolidation Rates: When to Freeze?

2007-03-08 10:33:40

( Financial )



BONE OF CONTENTION

Half of our current college graduates have financed their college education through student loans. Chances are, you are among them and the chances are bigger that you will avail of a student loan consolidation at one point in your life or another.

The main bone of contention against student loans and the main reason why people get a loan consolidation is to freeze student loan consolidation rates which fluctuate frequently. Student loan consolidation rates are so variable because they are based on Treasury bill rates.

Imagine the hassle of having to keep track of multiple student loan payments and having to deal with an ever-changing student loan interest rates. Getting a student loan consolidation solves both problems at the same time. When you consolidate, your student loan consolidation rates are fixed and you pay one simple payment under one lender. Under a student loan consolidation program, it is easier to budget your cash flow because your payments are invariable.

CONSTANT RATES

Your student loan consolidation rates will be based on the average rates of your outstanding student loans as well as the current student loan rates. From this, you will get a fixed interest rate that remains constant throughout your loan’s lifespan. The student loan consolidation rates will be constant because they will be unaffected by the sporadic nature of the market.

However, there is an accompanying risk to freezing your student loan consolidation rates. If you froze your rates at a time when the rates are high, then your student loan consolidation rates will remain high even if they have already decreased dramatically.

The best strategy is to look at the history of student loan rates and analyze them carefully. If you are in a time where the rates are at their lowest, then take full advantage of the low rates – get a student loan consolidation and freeze those rates now.


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