Interest rates and payments

Consolidation loans have longer terms than other loans. Debtors can choose terms of 10–30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25%. Some features of the original consolidated loans, such as postgraduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan, and consolidation loans are not universally suitable for all debtors.

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Federal student loan consolidation

In the United States both the Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDLP) include consolidation loans that allow students to consolidate Stafford Loans, PLUS Loans, and Federal Perkins Loans into one single debt. This results in reduced monthly repayments and a longer term for the loan. Unlike the other loans, consolidation loans have a fixed interest rate for the life of the loan.

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JP Morgan and Chase

JPMorgan Chase & Co. (NYSE: JPM) is one of the oldest financial services firms in the world. The company, headquartered in New York City, is a leader in investment banking, financial services, asset and wealth management and private equity. With assets of $1.6 trillion, JPMorgan Chase is currently the third largest banking institution in the United States,^[3] behind Bank of America and Citigroup. The hedge fund unit of JPMorgan Chase is the largest hedge fund in the United States with $34 billion in assets as of 2007.^[4] Formed in 2000 when Chase Manhattan Corporation acquired J.P. Morgan & Co., the firm serves millions of consumers in the United States and many of the world's most prominent corporate, institutional and governmental clients.

In 2004, the company merged with Bank One Corp., bringing on board CEO Jamie Dimon as president and COO and designating him as CEO William B. Harrison, Jr.'s successor. Dimon's pay was pegged at 90% of Harrison's. Dimon quickly made his influence felt by embarking on a cost-cutting strategy and replaced former JPMorgan Chase executives in key positions with Bank One executives -- many of whom were with Dimon at Citigroup. Dimon became CEO in January 2006 and Chairman in December 2006.

The Chase brand named is used for credit card services in the United States and Canada and the bank's retail banking activities in the United States. The JPMorgan brand is used by the Investment Bank as well as the Wealth & Asset Management Group's partially merged Private Bank and Personal Client Services divisions. Fiduciary activity within W&A is done under the aegis of JPMorgan Chase Bank, N.A. -- the actual trustee. The newly acquired Bear Stearns private client group is expected to operate under the name "Bear Stearns Wealth Management, a JPMorgan Company" within the Wealth & Asset Management structure.

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Interest Rates and Payments accdg to Wiki

Consolidation loans have longer terms than other loans. Debtors can choose terms of 10–30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. The fixed interest rate is calculated as the weighted average of the interest rates of the loans being consolidated, assigning relative weights according to the amounts borrowed, rounded up to the nearest 0.125%, and capped at 8.25%. Some features of the original consolidated loans, such as postgraduation grace periods and special forgiveness circumstances, are not carried over into the consolidation loan, and consolidation loans are not universally suitable for all debtors

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History of Loan Consolidation

The Federal Loan Consolidation Program was created in 1986. In 1998, the United States Congress changed the interest rate to the aforementioned fixed rate weighted mean, effective February 1, 1999. Consolidation loans taken out before that date had a variable interest rate, determined by the individual FDLP loan origination center (e.g., in the case of a university, that university) or FFELP lender (e.g., a third party bank).^[3][4]

In 2005, the Government Accountability Office considered consolidating consolidation loans so that they were exclusively managed through the FDLP. Based on several assumptions about future variations in interest rates, the loan volume, the percentage of defaulters, cost estimates from the United States Department of Education, it concluded that while doing so would incur an additional cost of $46 million, caused by the higher administrative costs of the FDLP compared to the FFELP, this would be offset by a $3,100 million saving comprised in part of avoiding $2,500 million in subsidy costs.^[1]

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