What is the interest rate on a Consolidation Loan?
The interest rate for both Direct Consolidation Loans and FFEL Consolidation Loans is fixed for the entire time you are repaying the loan at the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of a percent. By law, the interest rate will never exceed 8.25 percent. In 1998, Congress changed the interest rate calculation for Consolidation Loans. For example, Direct Consolidation Loans made prior to February 1, 1999, had a variable interest rate; that is, the rate could change each year of repayment. For information on the interest rate for your Consolidation Loans made prior to February 1, 1999, for a Direct Consolidation Loan, check with the Loan Origination Center’s Consolidation Department. For a FFEL Consolidation Loan, check with your lender.
As of February 1, 1999 the interest rate for both Direct Consolidation Loans and FFEL Consolidation Loans became a fixed rate for the entire time you are repaying the loan. The fixed rate is based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of a percent. By law, the interest rate will never exceed 8.25 percent. Prior to February 1, 1999 Consolidation Loans had variable interest rates. For information on interest rates for Consolidation Loans made prior to February 1, 1999, check with the Loan Origination Center’s Consolidation Department at the number listed on page 22 if you have a Direct Consolidation Loan or with your lender if you have a FFEL Consolidation Loan.
The rate for a consolidated loan is fixed for the entire time the loan is being repaid. The rate is calculated based on a weighted average of the interest rates on the loans being consolidated and is rounded up to the nearest 1/8 of a percent. This rate may be lower than some of the interest rates on the loans being consolidated. The interest rate will never exceed 8.25 percent. Can I consolidate my loans? If you are not in school you may be eligible to consolidate your loans. You should check with the lenders associated with the loans to see if consolidation is an option for you. Remember to review all of the terms of the consolidation loan to make sure that you will truly benefit from consolidation.
The interest rate on a consolidation loan is a fixed rate based on the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of a percent. For example, if a borrower has $5,000 in Perkins Loan debt at 5 percent, and $20,000 in Stafford Loan debt at 3.42 percent, the weighted average interest rate rounded up to the nearest one-eighth of a percent for this borrower would be 3.75 percent fixed for the life of the loan. How long is the repayment period on a consolidation loan? The repayment period on a consolidation loan is based on the amount the borrower owes. The more the borrower owes, the longer the repayment period. Loans which are not eligible for consolidation can be included for determining the length of the consolidation loan repayment period.
