What Are the Current Student Loan Consolidation Rates?

Despite what many people think, student loan consolidation rates are not different than what a graduate is already paying. In fact, the new rate on a consolidation student loan is simply the weighted-average of someone's current loan rates, rounded up to the nearest one-eighth of a percent (.125%).

For example, if three-quarters of your loan is at 8%, and one-quarter is at 6%, the new rate would be calculated as the follows:

8% x .75 = 6.00%

plus

6% x .25 = 1.50%

Total New Rate = 7.50%

Essentially, this is the same overall rate the borrower was paying prior to consolidation across all their loans, but it's now been combined into one loan.

The only major potential drop in rates comes when the borrower has government PLUS loans. Since many of these loans have rates that exceed the maximum student loan consolidation rate of 8.25%, this portion of the weighted-average is capped at 8.25%. Thus, if you have multiple PLUS loans at 8.50%, these could be consolidated into a new loan with a maximum rate of 8.25%.

Keep in mind that Federal student loan consolidation rates only apply to Federal loans such as Stafford, Perkins, and PLUS loans. Private student loans may also be consolidated, but not under the Federal consolidation student loan program. Be sure to talk to your private lender to explore the available student consolidation loans options.

For more information and to apply for Federal student loan consolidation, visit Loan Consolidation and Here.

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