Interest rates for Consolidation Loans

The interest rate for Federal Family Education Loan (FFEL) and Direct Consolidation Loans is set according to a formula that is established by federal statute. The fixed rate is based on the weighted average of the interest rates on the loans at the time you consolidate, rounded up to the nearest one-eighth of a percent. The interest rate does not exceed 8.25 percent. The consolidation interest rate is fixed for the life of the loan, which protects you from future increases in variable rate loans but also prevents you from benefiting from future decreases in variable rates.

If you have Stafford Loans that are issued on or after July 1, 1995, you can reduce the consolidation rate by up to half a percentage point or more if you consolidate before the end of the grace period.

The interest rate that you receive depends on which federal student loans are being consolidated. For example, your rate would be higher if you consolidated a 5.5 percent Federal Perkins Loan along with a 6.62 percent Direct or ffel Stafford Loan.

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 visit the Department of Education website.