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All types of federal student loans can be consolidated together except a Direct PLUS Loan that was taken out by a parent to help pay for a child’s education (student PLUS loans can still be consolidated).
However, private loans can’t be included in a federal consolidation loan.
A federal student loan consolidation calculator provided by US Bank was used to calculate the weighted average.
Borrowers who are out of college or are attending classes less than half-time can consolidate their federal student loans.
Federal consolidation loans can only be used for federal student loans, but private consolidation loans can be used for both federal private student loans.
Consolidation loans repay old loans with a brand new loan that has its own unique terms and conditions.
Student loan debt is a grave concern in modern America.
How Federal Consolidation Loans Work Borrowers can combine multiple (at least two or more) federal loans into a single Direct Consolidation Loan (this is the only federal consolidation loan available).Some lenders require that the borrower’s debt-to-income ratio be below a certain threshold.Many lenders also factor in a borrower’s employment stability and prospects – they may even have minimum annual income requirements.The new Direct Consolidation Loan provides a single fixed interest rate that is equal to the weighted average of all the loans being consolidated, and the interest rate is rounded up to the nearest eighth of a percent (0.123%).A weighted average means that the loans with a higher balance influence the interest rate more than loans with a smaller balance – the overall impact of each old loan on the new interest rate is proportional to the comparative balance of that loan.
The interest rate is primarily determined by the lender’s evaluation of the borrower’s credit history.