Consolidating federal student loans interest rates
Under the Direct Loan Consolidation Program, you can consolidate just about any type of federal student loan into a new Direct consolidation loan.Loans that are not eligible for consolidation include state or private loans that are not federally guaranteed. The fixed rate is based on the weighted average of the interest rates on the loan at the time of consolidation, rounded up to the nearest one-eighth of a percentage point.The interest rate must not exceed 8.25% for consolidation loans prior to July 2013.Consolidation loan borrowers should not be charged origination fees.
There is more information on Stafford loan limits on the Department of Education’s web site.Guaranty agencies pay off the lenders when borrowers default, and in turn, are reinsured by the Department of Education.The National Council of Higher Education Resources (NCHER) also has a fact sheet with a list of guaranty agencies.Interest Rates for Newer Loans: PLUS loans come in two varieties: 1) Parent PLUS loans are for parents borrowing for the education of dependent undergraduate children enrolled in school at least half time and 2) “Grad PLUS” loans are available for graduate and professional students.For PLUS loans first disbursed on July 1, 2019 and before July 1, 2020, the interest rate is 7.08%.
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The bad news is that the federal government has extraordinary powers to collect student loans if you default.