The way your consolidation loan's interest rates will be calculated will depend on what type of loans you're consolidating. If you are taking out a federal consolidation loan, your interest rate will be the weighted average of the interest rates on the student loans you are consolidating. This average is then rounded up to the nearest one-eighth of a percentage. The maximum interest rate for federal consolidation loans is 8.25%. Your interest rate is then fixed for the life of the loan. The interest rates for the private college student loan consolidation program are based on LIBOR, or the London Interbank Offered Rate. Private consolidation loans often come with a fixed initial rate, followed by a variable rate that fluctuates according to LIBOR.
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