Student Loan Interest Rates Set to Double On Monday

14191205-illustration-depicting-a-highway-gantry-sign-with-a-student-loans-concept-blue-sky-backgroundSeven million college students will see their student loan costs double on Monday, after a group of bipartisan lawmakers failed to agree on a plan to keep interest rates down.

The Senate adjourned for the July 4 recess on Thursday, but failed to keep interest rates on Stafford loans at the current 3.4 percent rate.  The failure to vote on a plan before the recess means that interest rates on new, federally subsidized loans will double to 6.8 percent Monday.

Congress’ Joint Economic Committee estimates that the average student will be paying $2,600 more starting July 1. On a $23,000 student loan repaid over 10 years, a student would be paying about $3,000 total interest.

Subsidized student loans are awarded based on financial need, and interest doesn’t accumulate while students are enrolled in college. (Unsubsidized loans, which are available to all undergraduates, already have an interest rate of 6.8 percent.) The increase was long-planned: it was originally supposed to happen last year, the result of legislation passed in 2007 that gradually lowered interest rates for five years, but an election-year coalition of student advocates and the Obama campaign successfully pushed for a one-year extension.

But after paying little attention to the issue for the past 11 months, lawmakers failed to agree on a new proposal and spent the past few weeks arguing about a solution.

A rare agreement between the Obama administration and Congressional Republicans on switching to a market-based rate led many observers to believe that compromise was possible. But the issue got bogged down in Congressional deadlock as Democrats pushed for capping interest rates or extending the current rates, while the House passed a plan that the Obama administration threatened to veto.

student_loanThis doesn’t mean, however, that college graduates with subsidized loans will actually pay more starting next month. As the article explains, the higher interest rate will apply only to new loans, issued this year. No one currently making payments will see a rate hike.  Whether students will actually pay the new rate — which applies only to new, federally subsidized loans — is unclear.

On Thursday, Senator Tom Harkin, the Iowa Democrat who chairs the education committee, said lawmakers would consider a one-year fix that would apply retroactively on July 10.  Since the federal government is the lender for all new student loans, Congress could adjust interest rates after the fact. But where the money will come from to pay for the extension, which last year cost $6 billion, is an open question.

The US government is already forecast to make a record $51 billion profit from the federal student loan program this year at current interest rates, which Sen. Angus King (I-Maine) described as “billions of dollars off the backs of our students.”

If lawmakers fail to make a retroactive deal that would undo the impending spike in interest rates, US college students may find themselves unable to afford taking out a federal loan.

Advertisements

10 thoughts on “Student Loan Interest Rates Set to Double On Monday

  1. If you are at all offended by even the contents of this story,
    it is highly recommended you do not watch this video.

    Dunga is perceived as a stolid coach who prefers results to creativity.
    Microsoft has an adorable two-page holiday family newsletter template that is
    free of charge.

  2. Have you ever thought about writing an e-book or guest authoring on other websites?

    I have a blog based upon on the same topics you discuss and would really
    like to have you share some stories/information. I
    know my viewers would appreciate your work.
    If you are even remotely interested, feel free to shoot
    me an e-mail.

  3. This is essential because if someday later if you will need to get your mower repaired then you won. “If it tastes bad, like licking a lawnmower, than it must be good for you. That day, I began to understand what being a one stripper was all about.

  4. Greetings from Los angeles! I’m bored to tears at work
    so I decided to check out your site on my iphone
    during lunch break. I enjoy the knowledge you provide here and can’t wait tto take a look when I
    get home. I’m surprised at how quick your blog loaded on my cell
    phone .. I’m not even using WIFI, just 3G ..
    Anyhow, wonderful blog!

  5. Wow that was strange. I just wfote an extremely long comment but arter I clicked submt my comkment didn’t appear.
    Grrrr… well I’m not writing all that over again. Anyways, just wanted to say excellent blog!

  6. These educational games are some of the best learning experiences that can be found on the Internet,
    but who knew they could also be so much fun. They are also able to express themselves well, they are proven to
    show less aggression, and they are popular in school. You have to resolve any puzzles to reach your
    target.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s