Consolidation Loan Weighted Average Examples:
The examples below will give you an idea of how the weighted average interest rates are calculated on your loans. To get an estimate of your consolidation rate, use our consolidation rate calculator.
EXAMPLE #1
In this simple example, a borrower has taken out four loans during graduate school and is consolidating them into one loan. All of the loans have the same interest rate, so the weighted average is equal to the current rate. That weighted average is then rounded up to the nearest 1/8 of one percent.
| Loan Type | Amount | Current Rate | Factor* |
|---|---|---|---|
| Sub Stafford | $ 8,500 | 4.70% | 1.080% |
| Unsub Stafford | $10,000 | 4.70% | 1.270% |
| Sub Stafford | $ 8,500 | 4.70% | 1.080% |
| Unsub Stafford | $10,000 | 4.70% | 1.270% |
| TOTAL | $37,000 | Weighted Average: | 4.700% |
| Consolidation Rate: | 4.750% | ||
* The Factor is the current rate for that loan multiplied by that loan amount divided by the total of all loans; ie – 4.70% x (8500/37000) = 1.080. Each factor is then added together to arrive at the weighted average. The weighted average is then rounded up to the nearest 1/8 of one percent.
EXAMPLE #2
In this example, a borrower has recent Stafford loans at the current repayment rate, in addition to older Stafford loans (disbursed prior to 7/1/98) with higher interest rates.
| Loan Type | Amount | Current Rate | Factor* |
|---|---|---|---|
| Sub Stafford | $ 8,500 | 5.3% | 0.731% |
| Unsub Stafford | $10,000 | 5.3% | 0.860% |
| Sub Stafford | $ 8,500 | 5.3% | 0.731% |
| Unsub Stafford | $10,000 | 5.3% | 0.860% |
| Sub Stafford | $ 2,625 | 6.1% | 0.260% |
| Unsub Stafford | $ 4,000 | 6.1% | 0.396% |
| Sub Stafford | $ 3,500 | 6.1% | 0.346% |
| Unsub Stafford | $ 4,000 | 6.1% | 0.396% |
| Sub Stafford | $ 5,000 | 6.1% | 0.495% |
| Unsub Stafford | $ 5,500 | 6.1% | 0.544% |
| TOTAL | $61,625 | Weighted Average: | 5.620% |
| Consolidation Rate: | 5.625% | ||
* The Factor is the current rate for that loan multiplied by that loan amount divided by the total of all loans; ie – 5.30% x (8,500/61,625) = 0.731%. Each factor is then added together to arrive at the weighted average. The weighted average is then rounded up to the nearest 1/8 of one percent.
Click here for general information on Loan Consolidation.
Click here for FAQ's on general consolidation issues.
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