Consolidating private student loans fixed interest rate
The number that matters is the yield during the May Treasury auction.Officials add 2.05% to that number to determine the new rate for undergraduate Direct Loans, 3.6% to determine the rate for graduate Direct Loans, and 4.6% to determine the rate for PLUS Loans.I relied on a small private student loan to fill an unexpected gap in funding my senior year — I was able to get the money almost immediately, but because the interest rate was higher than my other loans, I prioritized paying it back faster.If you’re not sure whether private or federal loans are the best choice, keep reading.Remember, even though rates can reset each year, the rate you receive when your loan is first disbursed remains your rate for the life of the loan.Federal student loan rates are tied to a 10-year Treasury note — basically, this is a loan investors can make to Uncle Sam.Private lenders offer both variable and fixed-rate loans, and the rate you’ll obtain is a direct result of your credit history (and your cosigner’s, if you have one).I used Credible to get personalized offers for a hypothetical student graduating from my own alma mater, American University, in 2016.
Your school, which functions as the lender in this case, awards Perkins Loans as part of a financial-aid package to students who demonstrate significant financial need — essentially, this means it will cost much more for you to attend school than your family can afford to pay; the bigger the gap, the more significant the need.
The personalized interest rates my “student” received ranged from 1.93% with College Ave to 7.49% with Citizens Bank.
A 1.93% interest rate on a private student loan certainly seems better than 3.76% on a federal Direct Loan, but there’s much more to these numbers than meets the eye.
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I remember being overwhelmed when I started at a pricey private college, which I paid for with a hodgepodge of scholarships, grants, federal and private loans, work study, and my own money.