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Facts About Student Consolidation

We All Offer the Same Rate and Terms — So Why Go Elsewhere?

Directory:  (links jump to content below)
Facts: facts you should know about student loan consolidation
we all offer the same interest rates
  we all offer the same payment reductions
  make sure you shop rate incentives
  go with service processing
  APPLY: start your application: it's FREE -- done in quick time
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  print this Student Consolidation summary booklet

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Fact 1: We All Offer the Same Interest Rate

Interest rates are set by the Federal Government and you will find the same rates no matter where you decide to consolidate your loans.

If you use the web to search for service companies to consolidate your student loans, you will find advertising claims showing low, low rates.

FACT: The interest rate on your consolidation loan is set according to Federal law. Your actual rate may vary depending on when you took out your student loans.

Your actual interest rate is determined by taking the weighted average interest rate of the loans selected for consolidation and rounding up to the nearest 0.125% (1/8%) or 8.25%, whichever rate is less.

use this worksheet to calculate your estimated rate

FACT: You can qualify for the initial low rates being advertised regardless of where you consolidate your student loans if you meet the following criteria:

  • the student loans that you are consolidating were first disbursed between July 1, 1998, and June 30, 2006. Loans disbursed before this period will have slightly higher interest rates.

  • you consolidated your student loans during your grace period (the first six months after you separate from school) and locked-in the in-grace rate discount.
FACT: The low advertised rates displayed on many web sites does not take effect until after many months.

So where does the lower than stated interest rates come from:
  1. first, you must meet the in-grace criteria
    as explained above and lock-in your in-grace rate that reduces your rate by 0.6%

  2. second, you must agree to have your monthly payments automatically deducted
    from your bank money account. This is a nice incentive that almost consolidation companies offer. With automatic draft, you can lower your initial rate by an additional 0.25%

  3. third, you must make consecutive, on-time monthly payments
    for a certain period of time (usually from 36-60 months)

    our educational partners offers the on-time rate reduction after 36-48 consecutive, on-time monthly payments

    If you make consecutive on-time payments for the period stated, the loan servicer will generally reduce your rate by another 1.0%

    (this rate reduction will remain in effect if you continue to make consecutive on-time payments).

  4. So your best rate is available as follows:
the initial consolidation rate for all loans disbursed after July 01, 1998 7.25%
in-grace discount: 0.6%
in-grace rate if you consolidate your loans while in grace 6.625%
automatic withdrawl discount: 0.25%
your rate if you automatically have your in-grace loan payments deducted from your money account 6.375%
consecutive, on-time discount: 1.0%
your best rate after making consecutive, on-time payments 5.375%

Fact 2: Same Payment Reduction Percentages

Your payment reduction percentage is subject to the total amount being consolidated

Many web sites claim that they can lower your student loan payments by up to 60% or more.

FACT: To get a high percentage reduction, you will need to consolidate under the graduated repayment plan, where your first initial payments are for interest rate charges only. You will not be paying down on your loan balance.

FACT: Any student loan consolidation company can offer the same high percentage payment reduction if you consolidate your student loans under the graduated repayment plan we have more information about this graduated plan.

FACT: Most student borrowers consolidate under the level repayment plan (payment on principal and interest). Under this plan, you are more likely to see payment reduction percentages from 21%-45%. The size of the percentage depends on the amount being consolidated.

Note that under the level repayment plan, your monthly payments are fixed for the entire term of your loan.

Best Explanation: Your total payment reduction percentage will depend on the amount of debt consolidated and type of repayment plan. So don't get hooked on believing that your student loans payments can be reduced at large percentages.

Fact 3: Shop Rate Incentives

Incentives such as paying on-time every month and automatic deduction can reduce your rate over time.

Many web sites claim that you can reduce your rate by up to an additional 1.25%, giving you a consolidation rate that can be as low as 5.375%.

FACT: how to get the 1.25% reduction:

  • to get the 1.00% rate reduction,
    you must make consecutive on-time payments for up to 36 months or more. The number of months may vary by consolidator. Note that in most cases, you must continue to make on-time payments to maintain the full 1.00% reduction.

    Many of our partners offer the full 1.00% reduction after 36 on-time, consecutive payments and for as long as you continue to make on-time payments

    we have more information the 36-month rate reduction.

  • to receive the 0.25% rate reduction,
    you must authorize your monthly payments to be automatically deducted from your checking or savings account. If you stop this method of payment, the 0.25% rate reduction will likely go away.

Best Answer: Let's summarize the benefits offered by almost all consolidators:

  1. You can reduce your consolidation rate instantly by 0.25% if you authorize automatic DRAFT, and

  2. You can reduce your consolidation rate by up to 1.00% after paying consecutively on-time your payments after 36 months.

    Generally, these benefits will continue only as long as you continue to have your payments automatically withdrawn and paid on time.

    See what incentives you can get
    from our partner at Educational Direct.

Fact 4: Go With Service Processing

The success of your consolidation experience will depend on the strength and depth of your consolidating service company.

Since almost all student loan consolidation companies offer

  • the same rate,
  • the same repayment reduction plan, and
  • similar rate reduction incentives

What distinguishing factor separates one consolidating company from another.

FACT: Check the Company History and Service

Our consolidating partners are the leaders in student loan consolidation. They have helped over a quarter of a million customers consolidate their student loans. These are customers like yourself who put their trust in a company with a history, service operation, and reputation for getting the job done right.

So when you are confused about who you should consolidate with, pick the company that has over a quarter of a million facts.

start your application today

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