C.U. Boulder Office of Financial Aid

Loan Consolidation

A consolidation loan will allow you to combine several federal student loans into one interest rate that will result in one convenient monthly payment. You can only consolidate once, so please read the following information carefully.

Consolidation loans offer a fixed interest rate for the life of your loan. This rate is based on the current interest rate(s) of your loans at the time your consolidation application is received. It is important to note that during the next federal reauthorization of student aid programs Congress is looking at doing away with the fixed rate consolidation loan and implementing a variable interest rate program. This means that it may be your last opportunity to lock in the lowest rates in the history of the program for the life of your loan.

Factors to consider:

You may have received offers from many different lenders asking to consolidate your loans with them. While some lenders will offer incentives that can result in a lower rate over time, remember that any Direct Stafford loans you borrowed between the fall of 2000 and now, were already given a 1.5 % reduction in the origination fees. This rebate is subject to the condition that you make your payments on time during the first 12 months of repayment as well as to keep your loans with the Direct Loan Program and not consolidate with another institution. If you consolidate your federal loans with another lender, you will lose that 1.5% interest rebate. This amount will then be added to the principle of your loan. Be sure to discuss this with your lender. We encourage you to be a wise consumer and make the decision that best suits your individual needs.

Applying for a consolidation loan must be done after you leave school. The rate is based on the weighted average interest rate of the loans being consolidated, rounded to the next nearest higher one-eighth of one percent and can not exceed 8.25 percent. There is an online calculator to help you figure out what your interest rate will be.

If you are already out of school, or don't consolidate until after graduating in May, you will begin payment on your loan as soon as it has been fully processed. So, if you want to consolidate after you are no longer enrolled, you might want to wait until your grace period is almost over and you are within one month of your original scheduled repayment.

For details on Federal Stafford Loan interest rates, see our loan information page.

Federal consolidation loan programs are restricted to federal guaranteed educational loans. You cannot consolidate alternative (private) loans under this program.

For more information see loanconsolidation.ed.gov.

Current Consolidation Interest Rate

The interest rate for a Direct Consolidation Loan is the weighted average of the interest rates on the loans being consolidated (as of the date the application is received), rounded up to the next one-eighth of one percent. This rate is fixed for the life of the loan. Call Direct Loan Consolidation at 1-800-557-7392, to get an estimate of your weighted average interest rate and to estimate what your loan payments might look like under each of the four repayment plans.

Your weighted average interest rate is calculated using the following steps:

Step 1: Multiply each loan by its interest rate to obtain the "per loan weight factor."

Step 2: Add the per loan weight factors together.

Step 3: Add the loan amounts together.

Step 4: Divide the total per loan weight factor by the total loan amount, and then multiply by 100.

Step 5: Round the result of Step 4 to the nearest higher one-eighth of one percent if it is not already on an eighth of a percent.

Step 6: Compare the result of Step 5 with the interest rate cap of 8.25 percent. The fixed interest rate on the Direct Consolidation Loan will be the lower of the two.

1/8 percent chart increments:
.125, .250, .375, .50, .625, .75, .875, 1.00

For an on-line calculator from the Direct Loan Servicer, see:https://loanconsolidation.ed.gov/.