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Wednesday, June 8, 2011

Student Loan Consolidation- What Debt Weighted Average Entails

Student loan consolidation allows the borrower to combine several federal debts into one. This allows him to pay little and at a lower interest rate. The period in which the payment is made is extended from the normal ten years to a period in which the borrower can comfortably pay off the debt. The lenders will report a zero balance on your account to the credit bureaus and the borrower will receive a new promissory note with a new interest.
The interest paid on a student loan consolidation program is considered to be lower than other debts. This is because, it is the weighted average of the debts about to be combined into one.  This may not be always the truth since at times the weighted average fall lower than expected. It is in between, it could be higher or lower. In most cases, the weighted average of the debts is higher than the original debts and many agencies will use this to convince a borrower to have all their education debts combined and paid as one.
Student loan consolidation does not cost the borrower anything, unless the weighted average is on the higher side. The agencies who are genuinely out to help a student will not ask for any fee since this is taken care of by the government subsidies. In case the debtor should find someone asking for a fee, then they are being coned.
It is important to know that this program is eligible to everyone. Both student and parents can get this service but they cannot do so by combining their debts and paying them as one. Married students cannot combine their cash advances to pay one huge debt but instead their debts will be handled individually.

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