consolidation interest loan rate student

Y ou could reduce the amount of your monthly payments by hundreds or even thousands of dollars a year by consolidating your student loans. You may lower your monthly payments, capture a low interest rate, conveniently make payments to just one lender, and for most borrowers, retain all of your student loan benefits - all at no cost to you, and without a credit check. In addition to a possible reduction of your monthly payment, you can also avoid all future rate increases resulting from Federal Government rate changes.

Under the Higher Education Act as currently authorized by Congress, you may be entitled to a reduction of up to 51% of your Federal student loan payments. In addition to a possible reduction of your monthly payment, you can also avoid all future rate increases resulting from Federal Government rate changes.

Consolidation Interest Loan Rate Student
The interest rate on consolidation loans is set by the federal government and will be the weighted average of the interest rates on your current loans rounded to the nearest 1/8 percent. This rate will not exceed 8.25%. The interest rate on your consolidation loan will be a fixed rate.

For your variable rate loans, the interest rate will change on July 1st. At this point, it is unknown if the rates will go up or down. But why wait? Submit your consolidation application today and get it off your mind. And, whether rates go up or down on July 1st -- you can get the lower rate with Iowa Student Loan (based on current regulations).

The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%. For example, suppose a student has just Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly.

If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example, if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of Stafford Loans (at 6.8%), the weighted average is ($5,000 * 5.0% + $10,000 * 6.8%)/($5,000 + $10,000)=6.2%

This weighted average, 6.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.25%. Note that the weighted average does not fundamentally alter the underlying cost of the loan. It preserves the cost structure by including each interest rate to the extent that it applies to part of the overall loan balance. For example, the consolidation loan in the previous paragraph says that of the $15,000 consolidation loan balance, $5,000 will be at 5.0% and $10,000 at 6.8%, yielding an equivalent interest rate of 6.2%.

If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between. Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same.

Federal Consolidation Loan - Interest Rates

Student Loan Type	Interest Rate
Federal Stafford Loans (student loans)	6,80 %
Federal PLUS Loans (parent loans)	8,50 %
Federal Grad PLUS Loans (for graduate & professional students)	8,50 %
These rates are for new loans first disbursed to all borrowers on or after 7/1/2006. The rate is fixed.