Federal Direct Consolidation Loan Interest Rates
The idea of borrowing money for college has been around for many years. However, it is only in recent years that the number of loans increases so drastically each year. Students want an education but simply do not have enough set aside to pay for school. Because of this many people have graduated with more than one loan, sometimes of various types. This means, of course, that the borrowers may have several payments to make in one month to different banks and agencies who supplied the loans.
There are now consolidation loans for both federally funded and privately funded loans. Those students wishing to consolidate all of their federal loans will find that applying for this loan right now will leave them hanging for a few days. The loan interest rates have been undergoing several changes because of the vast amount of fluctuation in the Prime rate due to the economic changes in our society.
If you applied for a consolidation loan before May 27, 2008, you should have received your consolidation loan and the fixed interest rate to go with it. However, if you applied for a consolidation loan after May 27th and before July 1st, you may not have yet received your final loan documents and loan interest rate. In waiting for the settling of the dust around the declining interest rates for variable rate loans, those doing the consolidation loans put the processing of applications on hold until after July 1st.
This was to assure the loan holders and those requesting consolidation loans that they would receive the correct interest rate. Those applying for consolidation loans after June 30th would automatically receive the new rates for the variable rate loans that were to be processed.
The loan interest rates for consolidation loans are based on a weighted average of the loans being consolidated. These are then rounded to the next highest 1/8 of one percent. However, the rate could not exceed 8.25% and it is fixed for the life of the loan.
Because there are several different types of federal loans, those being consolidated will fall under one of four repayment plans and the rates will be adjusted accordingly during this changeover period.