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UK Student Loans Direct. There is a similar lesser-known boom happening in the world of federal student loans. Refinancing or consolidating them could also help borrowers save thousands of dollars in interest, and consolidation can cut monthly payments of a borrower to a size that is much more affordable.

The two most common types of federal student loans available today are Stafford loans (for students) and PLUS (Parent Loans for students). The variable interest rate on these loans are the lowest they have been in more than 30 years – currently, Stafford loans with a floating rate of 3.46%, while the student at school, grace and deferment, and 4.06% in the reimbursement.

PLUS loan rates are currently 4.86%, regardless of the status of the student. If those rates would hold over the standard 10-year repayment term, which would be end this story. However, they will not keep. Federal student loan interest every year on July 1, Stafford loan rates can be as high as 8.25% and the PLUS climb 9% cap.

The big news for borrowers is that consolidating these loans into one low interest rate locks. The formula for determining a Federal Consolidation loan rate is taking the weighted average of the interest on loans the borrower wishes to consolidate and round to the nearest 1/8%.

In addition, there are other benefits to the federal student loan consolidation. With extended repayment and graduated repayment options, borrowers’ monthly payments can be reduced by 50% or more, especially useful to recent graduates trying to make ends meet.

Moreover, if a borrower several lenders and several monthly payments, consolidation allows the borrower a single and (usually) a lower payment to a lender – simplifying and improving the cash bill payment. Finally, the federal student loan consolidation free – there are absolutely no costs to consolidate.

Although the terms of a federal consolidation loan are the same, no matter who you borrow the money, some suppliers have incentives to borrowers to consolidate with them. In addition, these incentives can save borrower hundreds, even thousands of dollars in extra interest.

Most common is 25% discount rates to borrowers agree to their new consolidation loan electronic payments (debit). A significant discount is offered by some lenders as lenders timely monthly payments on their new consolidation loans.

Other lenders offer the same discount after 48 or 60 payments, and others offering fewer discounts at other payment intervals, but the idea is the same. Keep in mind, the faster the discount and the greater the discount, the more you save.