From Our Forum: Can I Consolidate Again? | 04.06.10

Posted in Consolidation, Loan Consolidation By Evan Jacobs

Based on a great question from our Financial Aid Forum, I’d like to take a second today to talk about multiple loan consolidations.

Our reader asks:

I have new federal loans and old federal loans. I consolidated my old federal loans to a private company (great lakes) several years ago. Can I consolidate my new federal loans and my old loans that I consolidated once may years ago into one loan now? If so how do I do this and what would the rates be like currently for this type of consolidation. My new federal loans were disrupted after 2006 and my old loans which I consolidated in 2002 are at a rate of 3.25%.

To answer the question, yes you can consolidate your new federal loans with your existing consolidation loan from 2002. However, the interest rate on the loan will not carry through to the new consolidation that you are performing now. The current rule for assigning interest rates is to take a weighted average of all the existing loans and interest rates and round up to the nearest 1/8th percentage point. Note that this new rate is fixed (meaning it won’t ever change unless you consolidate again) and cannot exceed 8.25% interest.

If you’d like to draw this out yourself, the formula would look like this:

Per Loan Weight Factor = Loan Amount($) * Interest Rate(Decimal)

So, say I had 3 loans to consolidate: two $5,000 loans at 5.8% and one $10,000 loan at 4.25% interest.

Loan 1 & 2 Weight Factor = 5,000*0.058 = 290 * 2 (2 identical loans) = 580
Loan 3 Weight Factor = 10,000*0.0425 = 425

(1005 / 20,000) * 100% = 5.125% interest on the new $20,000 consolidation loan

Thanks for the great question!


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