Can I Lock In a Lower Student Loan Consolidation Rate in the Future?
Many students and college graduates know relatively little about how student loan consolidation works and the rules and regulations that apply to consolidation loans. The question often gets asked if you can reconsolidate an existing student loan consolidation in order to lock in a lower student loan consolidation rate. The answer to this question in most cases is no, but there are some instances where you can consolidate a consolidation loan.
It is so important to get the best possible interest rates possible on your first student loan consolidation, because it cannot be refinanced to a lower interest rate later on. The only exception to this rule is if you add another student loan that wasn’t previously included in the consolidation loan. In this case, your student loan consolidation rate would be recalculated using a formula to basically combine the existing rate with the new rate obtained by adding another student loan to the consolidation. It’s sort of a weighted average, and in most cases, the interest rates will remain relatively the same.
Please note that you can only consolidate a consolidation loan one time. For this reason, it may be a good idea to leave one of your student loans out of your initial student loan consolidation so that you can have the option to reconsolidate later on. This can be a great strategy in some cases where, for instance, interest rates drop significantly 5 years from now and you can then consolidate again by adding the previously held-out student loan to get an overall better interest rate. Keep in mind that the new interest rate would be an average between the existing rate and the new rate, so you can’t lock in a brand new rate using the interest rate of the day.
This type of scenario has recently been seen in the UK where graduates who took out loans in the late 1990s can now refinance and get interest rates that are below 0%! I wouldn’t expect those type of rates in the US anytime soon, but they may dip in the coming months so stay tuned.
Consolidating student loans is a way to reduce student loan payments, lower interest rates and to make student debt easier to manage. Here at Consolidating Student Loans, you'll find a wealth of information related to students loans and consolidation. Thanks for stopping by, and make sure to grab our RSS feed to stay up-to-date with the latest student loan news.
