Congress to double student loan interest rates
June 29th, 2013
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Seven 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 theÂ July 4Â recessÂ on Thursday, but failed to keep interest rates on Stafford loans at the current 3.4 percent rate. The federally subsidized loans are set to expire onÂ July 1, after which the interest rate cap will rise to 6.8 percent.
Congressâ Joint Economic Committee estimates that the average student will be paying $2,600 more startingÂ July 1. On a $23,000 student loan repaid over 10 years, a student would be paying about $3,000 total interest.
âAt one level itâs modest, but if you have an entry-level position or canât find work, it starts to add up,âTerry Hartle, senior vice president of the American Council of Education, told Fox News.
In order to keep interest rates down, lawmakers would have to extend the cap, set a new one, or find another way to keep rates low. A bipartisan group of senators introduced the âBipartisan Student Loan Certainty Actâ, which would have secured a 1.85 percent interest rate on undergraduate Stafford Loans, a 3.4 percent rate on graduate loans, and a 4.4 percent rate on PLUS loans that are issued to parents of students. But after paying little attention to the issue for the past 11 months, lawmakers failed to agree on this proposal and spent the past few weeks arguing about a solution.
âWeâre tired of this being a political football,â Sen. Richard Burr (R-N.C.) said at a news conference with the co-sponsors of the bill.Â âThis is a responsible program from the standpoint of the American taxpayer.â
Senate DemocratsÂ on ThursdayÂ advocated for a temporary one-year delay of the current Stafford loan rates, but Republicans opposed the idea, and the Senate adjourned for recess.
âLast year we kicked the can down the road and passed a one-year extension for only a small group of studentsâŚ Why would we want to make the same mistake again and just kick the can down the road another year?âÂ Burr told AP.
But Sen. Jack Reed (D-R.I.) believes it would be best to extend current rates until Congress can come up with a better solution, to avoid the rise in interest rates.
âStudents across this country would rather have no deal than a bad deal,âÂ Reed said.Â âWeâre at the point where we have to do our best to extend the 3.4 percent interest rate while we work on a good deal, not just any deal.â
Sen. Tom Harkin, the chairman of the Senate education panel, said lawmakers would consider a retroactive fix onÂ July 10.Â 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 asÂ âbillions of dollars off the backs of our students.â
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.
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