With no agreement reached in Washington, the interest rates for federally subsidized Stafford loans have doubled to 6.8% starting this week. This is not so good news for college students who depend on friendly rates of interest in a tough economy to alleviate the burden of coughing up for college.
According to Phyllis Furman from the New York Daily News, a lot more than 7 million students have outstanding Stafford loans, and with the interest rate hike they can all expect their total repayment to go up by 1000s of dollars. A report by the Institute for school Access & Success puts the the amount at $4,000 for students who maximize their Stafford loans and pay them back over 10 years.
For weeks, Congressional Democrats have been anticipating the standoff over student loan interest rates would be a political boon. Attending college student newspaper advertisements, on social media platforms as well as in town hall meetings, Democratic lawmakers cast themselves as the saviors of low, subsidized lending rates, battling Republicans intent on subjecting college loans towards the whims of the financial markets. They banked on Republicans caving and extending the fixed, 3.4 % rate for at least a year, just like they did a year ago when a similar deadline loomed.
In the end, the student loan problem, like many bits of legislation previously two years, were left with three solutions: one from the Senate, one in the House and one from President Barack Obama C and no consensus. Once the President left on his visit to Africa last week, it was clear that the last minute agreement to stave off the hike was unlikely.
Still, not every is lost. Based on Jonathan Weisman of The New York Times, because of the fact that most students don’t sign your finance documents until August, lawmakers have a month to either agree on a brief retroactive rate freeze or think of a long-term solution on student loans.
Although they have missed the initial deadline, legislators could still mitigate most of the damage to the students if some type of agreement is reached before next month.
Senators Tom Harkin of Iowa and Jack Reed of Rhode Island, both Democrats, will rush new legislation towards the Senate on Thursday to freeze the three.4-percent rate for just one year while lawmakers attempt to reach a long-term agreement in a broader advanced schooling law. But even the bill\’s authors acknowledge it probably will not be able to get a vote before Congress leaves for a weeklong July Fourth break.
Instead, the legislation will make the fixed rate retroactive to July 1. Because most university students do not sign loan documents until early August, \”we have a little wiggle room, but not a lot,\” said a Senate Democratic aide involved in the drafting.
Meanwhile, Furman offers families some help in figuring out how to deal with increased financial obligations in case the interest rate bump isn\’t reversed. One of the suggestions she offers is choosing a less expensive school, considering a two-year rather than a four-year college, and starting to save money for tuition as early as possible.