How is the interest rate determined?
Each of the underlying loans selected for consolidation has an interest rate, which is the result of blending both the original rate charged at the time of approval, and the step-up rate that is effective in the 49th month of repayment. The two rates are blended proportionately depending on each loan’s month of repayment. This results in the true interest cost of that loan, and what we call the “blended interest rate.” These interest rates are then used in conjunction with the loan balances to arrive at a weighted average for the consolidation loan. Variable rate loans that are included in the consolidation follow the same formula, and use the fixed interest rate that corresponds with the bond year in which the loan was originated.
