Consolidation Interest Rate 7%

[seanerin]

Hello, 

I am looking into consolidating my student loans (these are loans from the 1990s). Currently on studenaid.gov the interest rate for all loans shows as 0% (but I think the actual interest rates are 3-4%). I was under the impression that consolidating loans would lead to a lower interest rate, but on studentaid.gov it shows the consolidated interest rate as 7% if I choose to consolidate. Seems it would be financially unwise to consolidate if that is the interest rate. Am I missing something? If it matters,  my student loans are serviced by Navient. 

Thank you.

[ccquest]

Sounds like your loans aren't at 3-4%, federal consolidation just brings everything together at a weighted average.

Check an old statement and see what they really were.

[Anonymous]

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@seanerin wrote:

Hello, 

I am looking into consolidating my student loans (these are loans from the 1990s). Currently on studenaid.gov the interest rate for all loans shows as 0% (but I think the actual interest rates are 3-4%). I was under the impression that consolidating loans would lead to a lower interest rate, but on studentaid.gov it shows the consolidated interest rate as 7% if I choose to consolidate. Seems it would be financially unwise to consolidate if that is the interest rate. Am I missing something? If it matters,  my student loans are serviced by Navient. 

Thank you.

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Consolidation with the same servicer only averages the loans interest, meaning, it literally does not change the interest rate, but it does create a new account (lowering your AAoA) and puts you at 100% util instead of if you had paid it down some or a lot, you start back at 100%.

I would never consolidate unless it was to enter a repayment program you previously could not like REPAYE or PAYE, since your loans are so old.

[Jshepherd04]

I just completed a Consolidation with my defaulted student loans. They were from 2004 and 2005 and hadn't been paid at all. I got a 2.5% interest rate. My account shows 0% at the moment because of the Covid laws and the account not getting charged interest at the moment.