Student Loan Rates
Student Loan Rates
Student loan interest rates are constantly changing at both the federal and private levels. The interest rate for Federal Family Education Loan (FFEL) and Direct Consolidation Loans is determined based on a formula founded by a federal government statute. The fixed interest rate is based on the weighted average of the student loan rates on the debt at the time the borrower consolidates. Note this number is rounded up to the nearest one-eighth of a percent during the consolidation.
For all government loans, student loan interest rates are never to exceed 8.25 percent. The consolidation interest rate is set for the life of the student loan. This protects the borrower from student loan rate increases in the future. It also prevents the borrower from benefiting from future decreases in loan rates.
Borrowers with Stafford Loans issued on or after July 1, 1995, have the option of reducing the student loan consolidation rate by up to a half or percentage point or more when combining his or her loans.
If a student wants to combine only Direct or FFEL Stafford Loans disbursed between July 1, 1998, and June 30, 2006, the 2007-2008 consolidation student loan interest rate would equal 7.22 percent. To combine the same loans during a deferment or grace period, the rate would equal 6.62 percent.
For borrowers who consolidated PLUS Loans made between July 1, 1998, and June 30, 2006, the student loan interest rate for the new loan would equal 8.02 percent. The interest rate granted would depend on the federal student loans that are being consolidated. For example, the borrower’s student loan rate would increase if they consolidated a 6.62 percent Direct or FFEL Stafford Loan with a 5 percent Federal Perkins Loan.
Student loan interest rates with private lenders are a whole different story. These rates usually range between 7.6 percent and 15 percent.