Direct Loans Consolidation Federal Interest Rate Cut

But it gave students with FFELP loans, a temporary period to consolidate college loans before they entered a grace or repayment status.

So, what sort of an incentive rate cut are they giving you?

Normally when you consolidate federal student loans, the rate is the weighted average of the loans rounded up to the nearest eighth of a percent, or 8.25% (whichever is less).

But for one year and one year only, you can get a Direct loans consolidation rate without it being rounded up to the nearest eighth of a percentage point.

Don't laugh. Who knows? Over the course of a 10-25 year loan period, that may be enough to buy you a college textbook.

In order to be eligible for this fabulous offer, you need to have at least one loan in two of these categories:

• FFELP loans held by an eligible lender
• FFELP loans that have been sold to the Department of Education
• Direct loans

If you want to figure out whether consolidating before your grace period or repayment starts is worth it to you, here is your one-time (good for a year) Consolidate Debt Calculator:

Enter the number of loans you will be consolidating, click, "Go" and then enter the amounts and interest rates for each to get your consolidation rate.

1. Once you consolidate, you will no longer have a grace period before repayment starts. (Although you can still keep your in-school deferment. This just means that once you graduate or drop below halftime, you will start repaying, instead of waiting 6 months.)

   If one of the loans has already entered its grace period, you can delay the start of repayment until the end of the grace period (while still keeping the rate cut) by filling in item #17 on the application.

2. If you have any borrower benefits in your FFELP loan(s) that are not included in Direct loans, you will lose them with the new loan. But this will happen if you ever consolidate these loans- there are no new FFEL consolidation loans being made, only Direct loan ones.
3. Parent college loans that were borrowed under the FFELP on or after July 1, 2008, had an in-school deferment until 6 months after graduation (or dropping below half-time). If the borrower consolidates while the student is in school or within the 6 month post-enrollment deferment period, repayment starts immediately.

You can compare what the difference is between this federal consolidation rate and the normal one by checking the student loan consolidation calculator, or check out some of my other free online calculators.

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But if you need that 6 months to build up your income, then the rate cut may not be worth it.

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