Federal Consolidation Rates & Terms
Federal Consolidation interest rates are determined on the basis of weighted average of the loans to be consolidated. These loans carry a fixed interest rate through out the repayment period. Again, the variability of the interest rates is determined by the lender while the rate of interest and pertaining guidelines are offered by the federal government.
Federal Consolidation Interest Rate:
The Rate and Terms of Federal Loans are generally fixed by the federal government for all the lenders who are under the Federal Family Education Program. The rate of interest charged on a consolidation program is comparatively very less. Private student loan holders pay higher interest rates compared with federal loans. The Students, Graduates and their parents whoever may be the applicant all stand to gain under the federal loan consolidation not only on the grounds of single liability and lower monthly payment but also on the grounds of lower interest rate and flexible repayment period.
Federal Loan Consolidation Repayment Period:
The repayment period in the case of a federal loan consolidation is also determined by the federal government. The term of loan depends on the loan amount to be consolidated. The term period ranges between 15 to 30 years. Consolidation also aims at lower monthly payment hence by increasing the repayment term of the loan this is made possible.
Types of Repayment:
There are three methods of repayments Federal Student Loan. The first one is the Standard Repayment method wherein the equated monthly installments paid are the same through out the life of the loan. The interest component of the installment is comparatively very less. The second option is called the Graduated Repayment option under this method of repayment the borrower will pay lower monthly installments during the initial years of repayment and slowly the monthly installment is increased to include the principal. Under this method the borrower ends up paying more interest during the life term of the loan. No prepayment penalties are charged under this option.
The term of repayment can be extended by 5 years where the amount of loan outstanding falls within a particular range. This option of extended repayment can be exercised both with the standard repayment and graduated repayment options.