More importantly, the amount of interest you pay over the lifetime of the loan will be about the same.
Special note to PLUS Loan borrowers: If you consolidate an 8.5% PLUS Loan, your interest rate will DECREASE to 8.25% due to the federally mandated maximum, so long as the PLUS Loans are consolidated.
For example, the consolidation loan in the previous paragraph says that of the ,000 consolidation loan balance, ,000 will be at 5.0% and ,000 at 6.8%, yielding an equivalent interest rate of 6.2%.If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between.Pay attention to what's happening with interest rates!The Federal government sets the Stafford loan interest rate every July 1. Consolidation is a topic that is discussed during exit interviews.Note: Including a Perkins Loan in a consolidation will result in loss of entitlements.
You will no longer be able to apply for forgiveness (loan cancellation) for occupations such as teaching, nursing, social work, or law enforcement.Don't be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate.The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates.For example, suppose a student has just Stafford loans originated on or after July 1, 2006. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 7/8ths of a percent, or 6.875%. If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between.For example, if the borrower has ,000 of Perkins Loans (at 5.0%) and ,000 of Stafford Loans (at 6.8%), the weighted average is: This weighted average, 6.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 6.25%.To learn more, consult with your student loan office or financial advisor.