Weighted Average Interest Rate for Student Loan Consolidation

The weighted average interest rate is used to determine your new interest rate if you decide to consolidate your federal student loans.

NerdWalletJuly 7, 2020

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Weighted average interest rate calculator

Before you decide to consolidate or refinance multiple student loans, you'll want to figure out what your debt as a whole is costing you. That number — your weighted average interest rate — will help you compare money-saving options.

Weighted average interest rate is the interest rate that represents the cost of all your loans combined. It is the weighted average of your current loans rounded up to the nearest one-eighth of one percent. The federal government uses the weighted average interest rate to determine your new interest rate if you decide to consolidate your federal student loans

For example, if you owe one student loan for $10,000 at an interest rate of 4% and another loan for $20,000 at 8%, you owe $30,000. The average interest rate would be 6%. But the weighted average interest rate — which takes into consideration the balance you owe at each interest rate — would be 6.67%.

How is your weighted average interest rate used?

If you consolidate multiple federal student loans into a single loan, your new loan will carry an interest rate that is the weighted average of your current loans rounded up to the nearest one-eighth of 1 percent. The repayment term is determined by the total amount you owe. The weighted average interest rate calculator above will estimate your new direct consolidation loan payment.

If you have good credit, you can refinance both federal loans and private loans through a private lender. Use the weighted average interest rate produced by the calculator above to shop and compare student loan refinancing offers when exploring whether it's a good fit for you.

Other student loan calculators

Student loan refinance calculator: Use this calculator to compare your current loan payment or multiple payments with a refinanced student loan.

Student loan consolidation calculator: Use this calculator to compare your payments under federal loan consolidation plans with your current bills.

Daily student loan interest calculator: Use this calculator to estimate the amount of interest that your loan accrues daily and between payment periods.

Discretionary income calculator: Use this calculator to determine what you would pay under federal income-driven repayment plans.

Student loan calculator: Use this calculator to determine the monthly payment on new student loans you take out, federal or private.

Student loan affordability calculator: Use this calculator to determine an affordable monthly student loan payment and how much that allows you to borrow for college.

Parent plus loans calculator: Use this calculator to estimate your monthly payments on federal direct PLUS loans.

Key terms in this story

Consolidation: A process that combines multiple federal student loans into one federal loan through the Department of Education. Consolidation won’t lower your interest rate, but may be necessary for some federal loan repayment programs.

Refinance: The process of swapping out your current student loans for a new private loan with more favorable terms, like a lower interest rate. Refinancing can help save you money on your loan and can be right for people with stable finances.

Weighted average interest rate: The interest rate that represents the cost of all your loans combined. The weighted average interest rate is the weighted average of your current loans rounded up to the nearest one-eighth of one percent. It’s used to determine your new interest rate if you decide to consolidate your federal student loans.

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