Pros and Cons of Fixed Rate Student Loans

Not many students know how to apply for a fixed rate loan and the pros and cons of it. Fixed rate student loans have several advantages and disadvantages. As the name suggests, one of the positive things is that borrowers will not have to worry about fluctuating interest rates. But before applying for a loan, you need to know what you're getting into.

A fixed rate student loans are can be achieved by consolidating student loans into one loan master. By consolidating your education loans, you get to return all the money they borrowed with a flat interest rate to a single creditor. This is really quite simple, since you do not have to go through the trouble of repayment of loans individually to various lenders. Yet the fixed interest rate determined by the consolidation could backfire because you may end up with a slightly higher interest rate. This is because the average interest rate on loans consolidated is rounded to the nearest 1/8 of a percentage point (0.125, 0.25, 0.375, 0.5, and so on). The lowest interest rate for a consolidation loan is 4.70%, while the highest rate would be 8.25% for Stafford loans and 9% for PLUS loans.

As the consolidation combines all the teaching aids at all, you end up with a large amount of debt and a longer repayment period. In general, the repayment of student loans at fixed rates ranging from 10 to 30 years. The duration of the repayment period depends on the amount of the loan. If you can afford it, you should stick with the 10-year repayment plan. Longer repayment period means certainly lower monthly payment (in special cases, the borrower can save up to 50% per month). However, there is one thing to keep in mind: the longer the period, the higher the interest rate.

Another disadvantage of consolidation loan is that it is possible to combine federal loans and private education. To build on these two types of loan, you must separate them. Federal financial aid students are easier to consolidate as many loans as Perkins, PLUS, Stafford, HEAL, SLS, NSL, and other federal education aid can be consolidated together. On the other hand, it is possible to combine private student loans, finding the right lenders, such as NextStudent, Student Loan Network, or Chase.

Source: http://EzineArticles.com/6507421