How the consolidation interest rate is set
A federal Direct Consolidation Loan has a fixed rate equal to the weighted average of the rates on the loans you consolidate, rounded up to the nearest one-eighth of a percent.
Weighted rate = Σ(Balance × Rate) ÷ Σ Balance → round up to next 0.125%
Example: $12,000 at 5.5%, $8,000 at 6.54% and $15,000 at 7.05% have a weighted average of 6.40%, which rounds up to 6.5%.
Consolidation vs refinancing
| Federal consolidation | Private refinancing | |
|---|---|---|
| Interest rate | Weighted average, rounded up | New rate based on credit |
| Keeps federal benefits | Yes | No |
| Can lower your rate | No | Yes |
| Cost | Free through StudentAid.gov | Usually no fee |
Reasons to consolidate
- Combine many federal loans into one payment and one servicer.
- Make older loan types (such as FFEL or Perkins loans) eligible for certain repayment plans and forgiveness programs.
Reasons to be careful
- Outstanding interest is capitalized when you consolidate.
- Choosing a longer term lowers the payment but raises total interest.
- Consolidating can affect progress already counted toward forgiveness in some cases; check StudentAid.gov first.
Apply only through the official StudentAid.gov site. Consolidation is free, so be wary of companies that charge for it.
Frequently asked questions
Does consolidating student loans lower my interest rate?
No. Federal consolidation keeps essentially the same average rate, rounded up by up to 0.125%. Only refinancing with a private lender can lower your rate.
Can I consolidate private loans with federal loans?
Not into a federal Direct Consolidation Loan. Only federal loans qualify. A private refinance can combine both.
How long can a consolidation loan term be?
Up to 30 years, depending on your total education debt, under the standard or graduated plan. Income-driven plans have their own terms.
Last reviewed: 2026-10-09