How interest rate is calculated

If you have decided that you want to consolidate your school loan, you may wonder what interest rate you will be paying on your consolidated loan.

You will need to know this interest rate as you will not know if you will be better off by consolidating any of your school loans or staying put as you are at present.

Without shopping around, your school friend may end up with a very different interest rate than yourself.

School loan consolidation rates are not tied to any rate, in particular, the Federal rate. How your consolidated interest rate is calculated is as follows. Your consolidation company will apply the weighted medium of all your loans. Now, they will look at each loan and its interest rate and round up to the nearest one eighth of one percent.

The average interest rate for a school loan consolidation is between 5% - 6%. The original loans have anywhere from 3.5% - 7%.