The interest rate on a consolidation loan is calculated using the weighted average of the interest rates on all of the loans being consolidated. This is then rounded up to the nearest 1/8 of a percent and capped at 8.25%.

Example:

A student has:

A $12,000 unsubsidized Stafford Loans with a fixed interest rate of 6.8%.

AND

A $5,000 of Perkins Loans at 5.0%

The weighted average =	*($12,0006.8%) + ($5,0005.0%)*
	12,000 + 5,000

= 6.27%

This weighted average, 6.27%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.375%.

Note: that the weighted average does not fundamentally alter the underlying cost of the loan. With loans with different interest rates, the weighted average interest rate will always be in between the various rates.

It is important to recognize that the consolidation loan does not necessarily offer you a lower overall interest rate - it just applies each loan and its respective interest rate to a single loan. The amount of interest you pay over the lifetime of the loan will be about the same as if you maintained separate loans - but the convenience of having a single consolidated student loan does make things much easier.

Other Fees

There should be no other cost to consolidate your loans. Do NOT pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans.

Federal education loans, such as the Stafford and PLUS loans, may charge some fees, but these fees are always deducted from the disbursement check. There is NEVER an up front fee for student loan consolidation.

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Student Consoldiation Loan Interest Rates

Interest Rates

Example:

The weighted average =

Other Fees