This method takes the average weight(balance) of your loans as compared with the interest rate to give you a new fair interest rate.
Example: Borrower has a balance of 0,000 on their federal student loans that is split into two different loans.
The Direct Consolidation Loan program is offered by the U. Department of Education to federal student loan borrowers.
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Understanding all the benefits will help you make a good financial decision.
Here is an overview of some of the many benefits: Consolidation may not be the best option for everyone.
The Income Based Repayment, and Pay As You Earn are often the most beneficial for those with financial difficulties.
The Direct Loan Consolidation program uses a weighted average interest rate to calculate your new interest rate in the consolidation rounded up to the nearest one-eighth of 1%.
A student loan consolidation takes the borrowers loans and combines all the loans into one new loan with one lender, and one weighted average interest rate.
This removes the burden from the borrower of trying to keep track of many different loans, with different lenders, balances, and interest rates.
Next, the remaining k balance makes up 75% of the borrowers total balance, so they would multiple 75% x 3.5% = 2.625%.
The Department of Education would then combined those two numbers to come up with the weighted average interest rate of 1.625% 2.625% = 4.25%.
What is the most important is to become educated about your loans, what programs exist to help you, and then to take action on what you determine to be the best for your particular situation?