Federal Student Loan Interest Rate and Consolidation Fact Sheet.
Click here to download interest rates table.
If you consolidate your loans you “lock in” the interest rate on the loans being consolidated. For Direct Consolidation Loans, if the application is postmarked or received electronically by midnight June 30, 2006, the Direct Consolidation Loan will be made using the current interest rates. For FFEL Consolidation Loans, lenders are authorized to use this same guidance. If you are interested in consolidating with a FFEL Program lender, contact the lending agency to find out about their deadlines.
What are the different kinds of loans?
The Direct Loan Program provides loans directly from the U.S. Department of Education to students and their families. FFEL Program loans are subsidized by the U.S. Department of Education and are provided by private lenders to students and their families. Stafford Loans are student loans made through the Direct Loan and FFEL programs. PLUS Loans are loans that parents can take out for the educational expenses of their dependent undergraduate children. PLUS Loans are made through both the Direct Loan and FFEL programs. Graduate/Professional PLUS Loans will be available for loans certified on or after July 1, 2006; the terms and conditions that apply to parent PLUS borrowers also apply to these students borrowers.
Why should I consolidate? A consolidation loan allows you to combine your federal student loans into a single loan with one monthly payment, which can be lower than the payment required under the standard 10-year repayment option. The consolidation loan interest rate is set as the weighted average of the interest rates of the loans being consolidated (rounded up to the next 1/8%) and is fixed for the life of the loan.
Although loan consolidation can simplify and lower your monthly payments, you should keep in mind that it also can increase the total cost of repaying your loans. By paying back your loans over a longer period of time (up to 30 years), you are charged more interest and end up paying more. Also keep in mind that consolidation may affect your grace period and deferment and cancellation options. Be an informed consumer!
How do I consolidate? To find out more about a Direct Consolidation Loan program, go to www.loanconsolidation.ed.gov. For information about the FFEL Consolidation Loan program, contact a participating FFEL lender directly. Check your loan documents for your lender’s toll-free customer assistance contact number. Get all the information before making your decision.
Where do I go to find out more? If you are uncertain of your current lender(s) or loan servicer(s), you can get information about your student loans by going to www.nslds.ed.gov or by calling the Federal Student Aid Information Center (FSAIC): 1-800-4-FED-AID (1-800-433-3243).
For more information about loan repayment or consolidation, go to www.studentaid.ed.gov and click on “Repaying.”
U.S. Department of Education. 2006
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