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One major advantage of student loan consolidation is that it can result in slightly lower interest rates. For example, although Stafford loans and PLUS loans are currently fixed rate loans, loans issued before July 2006 have variable interest rates, which may result in higher monthly payments depending on the adjusted rate. If you consolidate your student loans, you will have one fixed-rate loan. Federal student loan consolidation rates will be based on the weighted average of your Stafford loans, PLUS loans and other types of student loans. Interest rates on Stafford loans are capped at 8.25% while PLUS loan rates should be no more than nine percent. On the other hand, private student loan consolidation rates are variable since they are based on either the LIBOR or Prime index rates. LIBOR stands for the London Inter-bank Offered Rate, which is the three months average interest rate on US dollar deposits in the London market, while the prime rate is the interest rate that banks charge their most creditworthy customers. The best loans will have rates of LIBOR+2% or Prime-.05%, but this rate is available only to borrowers with great credit who also have a trustworthy co-signer. While a co-signer is not necessary to get a consolidation loan, having one will improve your chances of being approved for a loan. If you are looking at private student loan consolidation rates, try to get a loan with a rate tied to the LIBOR since it will be less expensive in the long run. You should keep in mind that many borrowers who offer low rates make up for this by charging high fees such as application fees, origination fees and repayment fees. The rule of thumb is that 3% to 4% in fees is equivalent to an additional 1% in the rate. Many borrowers may also advertise low rates for borrowers who consolidate while they're still in school or during the grace period, but then raise rates once the loan enters the repayment period. If you want to get the best student loan consolidation rates, here are some more tips. For Federal loan consolidation, consolidate during the grace period, since it can cut 0.6% from the interest rate. If your Stafford loans were granted before July 2006, you might also consider consolidating them since this will fix their rates, protecting you from rate fluctuations that could result in higher monthly payments. And, if you are going for private debt consolidation, try and improve your credit score before you apply, since it might qualify you for a lower rate from borrowers. For much more information, visit: student loan consolidation and student loan consolidation rates<\p>.
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