How is My Federal Consolidation Interest Rate Calculated?

So you’re getting ready to consolidate and are wondering what your interest rate will be. That’s certainly a fair question. I mean, when you go out to dinner you don’t pay for your meal before you eat it. You make sure you get what you ordered, that is tastes good, and that the temperature is to your liking. Then, at the end of the meal, you take out your credit card and sign on the dotted line.

Why should things be any different in the consolidation world? Don’t sign and then ask questions later. Get the answers you need up front.Here is an interesting federal consolidation fact. Ten students who graduate from the same university this May could very well have ten different interest rates. But how can this happen?Unlike in other financial circles federal consolidation interest rates are not tied to one thing in particular, like the Fed Funds Rate.

To arrive at your fixed interest rate the consolidation company simply takes the weighted average of all your loans. They look at the interest rate and the amount of each loan, then round up to the nearest eighth percent.Nowadays undergraduate students are coming out with rates ranging from 3.61% to 6.8%, and end up consolidating for about 5-6%. A lot of grad students carry grad plus loans at 8.5%, which elevates their fixed amount.