## Weighted Average Interest Rate

Student loans do not have the same interest rates year after year. Congress can change federal student loan rates each year and private loan rates depend on variable factors like credit score. This leaves most four-year college students with student loans of varying amounts and interest rates. To help you make the best financial decisions for yourself, you must calculate your loans’ weighted average interest rate.

### What is Weighted Average Interest Rate?

Simply put, a weighted average interest rate is the overall interest rate on all of your debt combined. It is more involved than just averaging your interest rates because it considers the amount of each loan. For example, if you owe $10,000 at 4% interest and owe $15,000 at 6% interest, the average interest rate is 5%. But, the weighted average interest rate would be 5.2%. That happens because your loan at 6% has a bigger balance than your loan at 4%, and thus pulls the rate higher.

### How To Use The Weighted Average Interest Rate Calculator

We created our easy-to-use weighted average interest rate calculator so that you accurately determine your weighted average interest rate. To use it, you need to input each of your current loan balances and their respective interest rates. Make sure that your balances are up-to-date to ensure the most accurate results. Make sure each loan is entered individually unless they share the same interest rate, then you can combine those with the same rate.

### Weighted Average Interest Rate and Your Federal Loans

Consolidating your federal student loans makes them eligible for different repayment options and forgiveness programs. The interest rate on a Direct Consolidation Loan takes your loans’ weighted average and rounds it up to the nearest one-eighth of a percentage. Under federal consolidation, your loans cost about the same as they did when they were separate. Input only your federal student loan data into our calculator to get an estimate of this rate.

This calculator does not round up 1/8^{th} of a percentage since others might want to refinance privately. This calculator will give you your exact weighted average interest rate.

## Weighted Average Interest Rate and Private Refinancing

The weighted average interest rate is crucial when it comes to refinancing your private student loans or your private and federal student loans together. Unlike federal consolidation rates, refinancing rates do not consider your weighted average interest rate. Private lenders offer rates based on the loan amount and your credit score.

However, your weighted average interest rate gives you a reference point as you consider refinancing options. If your weighted average interest rate is 5.2%, you want a refinance rate that is at least as low as 5.2%. A rate over 5.2% makes your loan more expensive. In some situations, refinancing at a higher interest rate could make sense. It can help you cut out a cosigner or extend the loan term, which would lower your monthly payments.

## Paying Off Private Loans

Knowing your weighted average interest rate can also help you determine when it is best to pay off your loans early and when it is better to invest. For example, if your weighted average interest rate is 4.7%, but you can earn 6% back on investments, investing your extra money may make sense. Your net return would be 1.3%, so you get more out of your money. Investments might include real estate, starting a business, buying stock, or a number of other ventures.

Use our weighted average interest calculator to see if federal consolidation or private refinancing makes sense for you.