Student loans in Canada help college and university students to finance their education. The federal government funds the Canada Student Loan Program (CLSP) while the provinces too will their own schedules running pin parallel with the CLSP. Though such loans are not just for free, one has to pay the interest rates accrued on such loans. If your major objective is reducing our monthly payment obligation, then it is absolutely necessary for you to learn more about student loan consolidation interest rates. The payment you make could exceed 20% or less each month depending on what your interest rate clocks in at. It doesn’t matter what people think, student loan consolidation rates are similar to what a graduate pays. The new rate on a student loan consolidation is simply the weighted average of a person’s current loan rates, approximated to the nearest 1/8 of a percent, which is 1.25%
Student loan rate is calculated using the weighted average of the current individual current loan rates. For example, if ¾ of your loan is at 8%, and one quarter is at 6%, then the new rate will be calculated in the following manner:
The two percentages are added to obtain a total new rate of 7.50%. This is basically the same rate the borrower was paying before consolidation of all their loans, but now it has been joined to become one loan.
The only major cause of drop in the loan rates arises when the borrower has government PLUS LOANS. This is because majority of such loans have an interest rate that exceed the student loan consolidation rate of about 8.25%, this portion of the weighted average is charged at 8.25%. Therefore if you have posses multiple plus loans at 8.5% then these could be consolidated to into a new loan with 8.25% interest rate.
There exist majorly two types of student loan consolidation rates found in the US, namely:
Federal student loan consolidation rate: this rate only applies to loans such as Stafford, Perkins and PLUS loans. The interest rates for federal student loan consolidations are pegged on the average weighted average of student loan interest rates. This type of loan will have various rates depending on he type and disbursement dates. If you poses federal loans at a variable interest rate, then it’s about time you consolidate them.
When you consolidate federal loans the interest rates will be he weighted average of all your loans approximated to the nearest 1/8 percent.