The interest rate for FFEL and Direct Consolidation Loans is set according to a formula established by federal statute. The fixed rate is based on the weighted average of the interest rates on the loans at the time you consolidate, rounded up to the nearest one-eighth of a percent. The interest rate does not exceed 8.25 percent. The consolidation rate is fixed for the life of the loan, which protects you from future increases in variable rate loans but prevents you from benefiting from future decreases in variable rates.
Borrowers with Stafford Loans issued on or after July 1, 1995, can reduce the consolidation rate by up to half a percentage point or more by consolidating before the end of the grace period.
The interest rate you would receive, however, depends on which federal student loans are being consolidated. For example, your rate would be higher if you consolidated a 5 percent Federal Perkins Loan along with a 6.62 percent Direct or FFEL Stafford Loan.
For the new interest rates in effect from July 1, 2008 through June 30, 2009 for variable rate Direct Subsidized Consolidation Loans, Direct Unsubsidized Consolidation Loans, Direct PLUS Consolidation Loans, Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans click here.
Source: U.S. Department of Education