For Or Against Consolidation - What All Graduates Should Know About Student Loans Consolidation

During this time of year, many new graduates begin to wonder whether it is to their students federal loans or not, should be consolidated. This is a big decision itself for several reasons. It is not only a long-standing financial obligation but also an irreversible companies as well. Graduates wonder all the time, whether it back to consolidate their federal student loans.

This question is a very simple answer, if the fresh graduate Stafford loans was alsoThe consolidation should then be able to merge the past with their current loans consolidated Stafford loans. However, this does not change, the interest on its last consolidated loans. The interest rates are calculated according to the weighted average. Let's take a typical case:

The graduate consolidate some loans in 1995:

$ 35,000 with a fixed rate of 4.5% (This is a hypothetical rate)

The graduate then goback to school and take an additional loan:

$ 30,500 Stafford loan with a fixed interest rate of 7.8% (This is a hypothetical rate)

$ 22,000 plus grad loan with a fixed interest rate of 9.5% $ (This is a hypothetical rate)

Now a graduate from the consolidation of all three loans together thinks:

$ 35,000 at 4.5%


$ 30,500 at 7.8%


$ 22,000 at 9.5%

TheirInterest rate is determined by calculating the weighted average of the loans it provides:

1. Step: Calculate the annual interest on a loan

35,000 x 0.045 = 1,575
30,500 x 0.078 = 2,379
22,000 x 0.095 = 2,090

2. Step: Add together the annual interest

1,575 + 2,379 + 2,090 = 6,044

3. Step: Add together the principal amounts

35,000 + 30,500 + 22,000 = 87,500

4. Step interests divided by the sum of the sum of the principal amounts

(6,044 / 87,500) x 100 = 6.907

5. Step: In order to preserve it until the next 1:8

6.91

As a result of having different prices in different ineterest loans, the price is calculated based on the weighted average of the various rates.There is not a condition that allows the graduates to reconsolidate a previously consolidated Federal Republic of loans. Such > Loans will continue on its interest rate for the entire duration of the loan.

Now the question back to the graduates, they should consolidate their loans? The average college graduate comes home from school at around U.S. $ 20,000 debt. This leads to a monthly repayment of 231 $. Is therefore one of the major issues shall take into account, they can afford $ 231 per month over a period of 10 years? Or will it be practical for them to undertake> Consolidate and pay $ 154 per month over a period of 20 years?

My personal advice is that if they can not afford is the logical thing to do to consolidate their student loans now. This can reduce their monthly payments to have the future when they will start to earn more, they are not much problem to pay it off.

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