Students, your loan interest rate is about to double [View all]

[sinkingfeeling]

http://moneyland.time.com/2012/03/20/students-your-loan-interest-rate-is-about-to-double/?hpt=hp_t3#ixzz1perjJg9G


Prepare yourself: on July 1, as many as 8 million college students will see their interest rates on federally subsidized student loans double, from 3.4% to 6.8%. According to the U.S. Public Interest Research Group, that increase amounts to the average Stafford loan borrower’s paying $2,800 more over a standard 10-year repayment term for loans made after June 30.


With the deadline looming, college students last week delivered some 130,000 letters to Congress, urging legislators to keep the interest rate at 3.4%. Like many things in Washington this election year, the issue has become a partisan battle. President Obama and other Democrats have urged Congress to act to extend the low rate (Democrat Representative Joe Courtney of Connecticut has introduced legislation that would stop the rate hike), while Republicans favor allowing the rate to return to 6.8%. Even the cost estimates vary: Democrats predict that keeping the rate at 3.4% for one additional year would cost about $3 billion, while Republicans say it would cost nearly $7 billion. (Mark Kantrowitz of FinAid.org estimated the cost at $5.6 billion for one year.)



But the increase isn’t quite as devastating as it has been portrayed. To start, the 3.4% rate has been in effect only for one year. The rate decrease was passed by Congress in 2007 when Democratic legislators made good on campaign promises and passed the College Cost Reduction and Access Act. After the law passed, the interest rate on subsidized loans fell each year until reaching 3.4% this year — the same year it was set to expire.



Read more: http://moneyland.time.com/2012/03/20/students-your-loan-interest-rate-is-about-to-double/?hpt=hp_t3#ixzz1pg2on9oy