Student Loan Consolidation Rate

Student loan consolidation is the combining of student loans into a single consolidation loan with the purpose of reducing monthly payments, easing the stress of handling multiple college loans and extending payment terms. There are both federal and private student loans and federal and private student consolidation loans.

The federal student loan consolidation rate is fixed while the private student loan consolidation rate may be variable or fixed. Research of the student loan consolidation rate is extremely important as just a few percentage points can make a large difference in the amount of money required to pay back the loan.

Fixed vs Variable Student Loan Consolidation Rate

When you apply for a student consolidation loan, there are programs that offer variable rates. These rates can rise or fall based on economic conditions such as inflation. If inflation rises, average interest rates will increase as well as your student loan consolidation interest rate.

Conversely, the same is true if the economic conditions are such that the average interest rate declines, so too will your student loan consolidation interest rate.

For the new interest rate calculations in effect from July 1, 2009 through June 30, 2010 for variable rate Federal Subsidized Consolidation Loans, Federal Unsubsidized Consolidation Loans, Federal PLUS Consolidation Loans, Federal Subsidized Loans, Federal Unsubsidized Loans, and Federal PLUS Loans, review the following chart.

FFEL and Direct Loan Interest Rates Effective July 1, 2009

Fixed Rates for Loans First Disbursed on or After July 1, 2006

Loan Type	Grade Level	First Disbursed Between July 1, 2008 and June 30, 2009	First Disbursed Between July 1, 2009 and June 30, 2010

Subsidized Loans	Undergraduate	6.00	5.60
Subsidized Loans	Graduate	6.80	6.80

Unsubsidized Loans	Undergraduate	6.80	6.80
Unsubsidized Loans	Graduate	6.80	6.80

PLUS Loans	Parent and Grad Student	7.90 for Direct Loans and 8.50 for FFEL	7.90 for Direct Loans and 8.50 for FFEL

Variable Rates for Loans First Disbursed Between July 1, 1998 and June 30, 2006

These rates were calculated based upon statutory formulas and equal the bond equivalent rate of the 91-day Treasury bills auctioned on May 26, 2009, plus certain statutory percentage add-ons. The 91-day Treasury bills were auctioned at 0.178 percent, rounded to 0.18 percent.

Loan Type	Loan Status	For the Period July 1, 2008 to June 30, 2009	For the Period July 1, 2009 to June 30, 2010

Subsidized Loans	Repayment or Forbearance	4.21	2.48
Subsidized Loans	In-School, Grace, or Deferment	3.61	1.88

Unsubsidized Loans	Repayment or Forbearance	4.21	2.48
Unsubsidized Loans	In-School, Grace, or Deferment	3.61	1.88

PLUS Loans � Parent and Grad Student	All Statuses	5.01	3.28

Notes:

Interest rates on Stafford and PLUS loans disbursed before July 1, 1998, are calculated using different statutory formulas, percentage add-ons, or both.
Generally, interest rates on Consolidation Loans are fixed rates calculated based on the weighted average of the loans being consolidated rounded up to the next higher 1/8 percent, not to exceed 8.25 percent.

Federal vs Private Student Loan Consolidation Rate

Federal student consolidation interest rates are the lowest rates and are also fixed. You will need to qualify for a federal student consolidation loan based on certain criteria. Federal Family Education Loans (FFEL) and Direct Consolidation Loans have specific qualifications that must be in order to obtain a loan.

Only apply for private student loans if you cannot get any additional forms of financial aid to cover your college expenses. A co-signer, such as a parent or grandparent, is required if you do not have an income.

The private student loan consolidation rate will vary between lenders such as banks, credit unions and online lenders. For example,

The private student consolidation loan rate is based on the rate banks charge each other for loans, plus a margin that is determined by you or your co-signer's creditworthiness. Your rate is determined individually when you apply.

Depending on your credit history, your variable interest rate and Annual Percentage Rate (APR) may be higher and will increase or decrease as the rate banks charge each other changes.

Federal student consolidation loan rate for FFEL and Direct Consolidation Loans is set using a formula determined by federal statute. This is a fixed rate based on the weighted average of the interest rates of your loans at the time you consolidate and are rounded up to the nearest one-eighth of a percent. This rate will not exceed 8.25%.

The rate of your consolidation loan is fixed for the life of the loan, protecting you from future rate increases that occur in variable rate loans but also prevent you from the benefits of future decreases in variable rates.