Consolidating federal student loans department education
If the credit scores have improved significantly, this may lead to a lower interest rate, potentially saving the borrower money.If a borrower’s private student loans were obtained with a cosigner, and the private consolidation loan does not involve a cosigner, consolidating the private student loans releases the cosigner from his/her obligation. However, since the interest rates on a private student loan usually depend on the higher of the borrower’s and cosigner’s credit scores, this may lead to an increase in the interest rate on the private consolidation loan, unless the borrower’s current credit score is better than the cosigner’s previous credit score.
Defaulted loans may be consolidated in certain circumstances.Previously, the interest rate would have been capped at 8.25%.A consolidation calculator may be used to calculate the interest rate on a federal consolidation loan.While one could use a private consolidation loan to refinance federal education loans, this is generally not recommended.Usually the federal education loans have lower fixed interest rates, so a private consolidation loan may cost the borrower more.
The interest rate on a federal consolidation loan is a fixed rate equal to the weighted average of the interest rates on the federal education loans that are being consolidated, rounded up to the nearest one-eighth of one percent.