What are my loan consolidation options?

Interest Rates on Federal Consolidation Loans

Federal consolidation loans have fixed interest rates. The interest rates on federal consolidation loans are based on the weighted average of the interest rates of the federal education loans being consolidated, rounded up to the nearest 1/8th of one percent. 

Using a weighted average roughly preserves the current interest rates of the loans.

Example:

  • $5,000 loan at 3.4%
  • $7,500 loan at 6.8%
  • $10,000 loan at 6.8%

The interest rate on the federal consolidation loan would be:

($5,000 x 3.4%) + ($7,500 x 6.8%) + (10,000 x 6.8%) ÷ ($5,000 + $7,500 + $10,000) = 6.04%

This would be rounded up to the nearest 1/8th of one percent, or 6.13%.

Monthly Payment Before Consolidation (standard repayment, 10 year term) Monthly Payment After Consolidation (extended repayment, 20 year term)

$5,000 loan at 3.4%: $50.00

$7,500 loan at 6.8%: $86.31

$10,000 loan at 6.8%: $115.08

Total: $251.39

$22,500 consolidation loan at 6.13%: $162.82

There is no cap on the interest rates on federal consolidation loans.

What are my loan consolidation options?