Student interest rates are likely to DOUBLE on Monday!
But what does this mean? Who does this affect? Why is this happening?
Allow me to explain in the simplest way possible …
Friday (today) is the LAST day that college students can get a federal student loan with a 3.4% interest rate. On July 1, interest rates will double to 6.8%.
What loans will be affected by the interest rate increase?
Only interest rates on subsidized Stafford Loans will double. These are loans for undergraduate students only and they don’t accumulate any interest while the student is in college.
Whose interest rates will go up?
College students applying for subsidized Stafford Loans after July 1. The rate hike will not affect those who already have existing Stafford loans, however, Congress’ joint economic committee has estimated that this increase will cost the average student about $2,600 and there are 7 million students who rely on these loans to pay for their education.
Why is this happening?
Last year the interest rates were set to increase on July 1; in order to prevent this from happening, Congress and the President passed a bill that extended the 3.4% interest rate for another year. This meant that congress had a full year (from June 2012 – June 2013) to come up with an agreement to prevent this increase from happening again.
Republicans came up with a bill to tie federal student loan interest rates to the cost of government borrowing which means the interest rates would fluctuate each year based on the economy.
Democrats wanted to extend the 3.4% interest rate again until congress could reform the law that deals with federal student loans.
Needless to say, neither party agreed on the others’ solution and this is why interest rates will increase on July 1.
Is there anything I can do?
Yes! You can press your members of congress to do something when they get back from vacation. Let them know how much education means to you and others, and that financial support is necessary and should be provided with decent interest rates. You can Send an email to Congress or you can call Congress
Is there hope?
Possibly. Congress can very well come back after their vacation, reach an agreement and retroact it, but that’s not a guarantee.