Consolidating subsidized and unsubsidized loans
For example, say you you earned your Bachelor’s degree in four years and graduated in 2011 .
If you borrowed conservatively (,500 of subsidized federal Stafford loans per school year), your interest rates are as follows: 2010/11 at 4.5%; 2009/10 at 5.6%; 2008/09 at 6%; and 2007/08 at 6.8%.
Federal loan consolidation can lower your monthly payment if you extend your loan term, but stretching out payments over a longer time period without an interest rate reduction can increase overall repayment costs.
According to the Department of Education, you cannot consolidate a loan that’s already been consolidated, unless you add on an additional, existing eligible loan or loans.
When you consolidate federal loans, your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next ⅛ of 1%.
So, for instance: If the average comes to 6.15%, your new interest rate will be 6.25%.
You’re generally eligible once you graduate, leave school or drop below half-time enrollment.
Even if you have only one defaulted student loan, you may obtain a Direct Consolidation Loan to resolve the default.If you had different amounts at each interest rate, your interest rate would be based on a fraction of your total new loan.For instance, if you borrowed ,000 as a freshman at 4.5% and ,000 as a senior, your consolidated interest rate would drop.Since you borrowed the same amount each year, each interest rate represents an equal amount of money, which is called a weighted average.Thus, you can divide the sum of all your loans by four to get your consolidated rate of 5.725%.
