Countdown to Higher Student Loan Interest Rates Continues
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UPDATED: Mar 19, 2012
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Unless Congress acts soon, students will see the interest rate on federally subsidized Stafford loans increase from 3.4 percent to 6.8 percent. This doubling of student loan interest rates will be the result of legislation setting an interest rate cap expiring come July of this year.
If the interest rate of student loans doubles, those paying for their college career with federal financing will see a massive uptick in their monthly bills. Worry over this surge in price has prompted more than 130,000 letters to be mailed to Congress, pleading the government to stop the interest rate legislation from expiring.
“I will be put back into buying a house and saving up for my expenses later on in life, and life as we know, is very unexpected. Adding that variable [doubled interest rates] definitely limits my ability to be successful,” said Tyler Dowden, an 18-year-old freshman at Northern Arizona University, in a press conference.
According to the Michigan-based news source M-Live, Jennifer Mishory, a director for a non-profit aimed at representing people between the ages of 18 and 34, says the possibility of a rate hike is a huge problem. She claims that many students are already struggling to pay back their student loans, and this rate hike will only hinder their efforts further.
But despite student’s cries, house representatives are not facing an easy decision.
Rep. John Kline, R-Minn., chairman of the House Education and the Workforce Committee, told The Associated Press the interest rate increase is the “result of a ticking time bomb set by Democrats five years ago.” Referencing legislation passed in 2007 that artificially lowered rates for federal student loans to 3.4 percent, he warns that somebody is going to have to pay the bill.
“We must either allow interest rates to rise on student loans, or stick taxpayers with another multi-billion dollar bill,” explained Jennifer Allen, a spokeswoman for Kline, in an email to The AP.
The cost for keeping rates so low is right around $6 billion every year.
Whoever receives the brunt of this interest rate bill is not going to be happy. If the rate reduction continues, the general public, many of whom are suffering from a slumped economy, would be forced to shoulder yet another financial blow. If it subsides, the nation’s students will suffer through more expensive student loan bills.