A matter of life and debt
If it seems like you have heard this story before you have. Last year the proposed student loan interest rate hike issue was being addressed in Washington.
A year later that issue is being revisited.
College students taking out new loans for the fall term will see interest rates twice what they were in the spring – unless Congress fulfills its pledge to restore lower rates when it returns after the July 4 holiday.
Subsidized Stafford loans, which account for roughly a quarter of all direct federal borrowing, went from 3.4 percent interest to 6.8 percent interest on Monday.
Efforts to keep interest rates from doubling on new Stafford loans fell apart last week.
But if an agreement remains elusive, students could find themselves saddled with higher interest rates this year than last.
The only silver lining is that you really can’t take out student loans more than 10 days before the term starts.
But that is little consolation for students looking at unexpected costs waiting for them on graduation day if Congress doesn’t take action before it breaks again for the month of August.
In April, the Democrats’ solution was setting interest rates at the cost of the 10 year treasury note, plus a 0.93 percent margin, with no cap on the maximum interest rate that students could pay. It also called for locked-in interest rates for the life of the loan, meaning that the interest rate that you pay today on the loan would be the same as the interest rate that you pay in 10 years.
In mid-May, Republican Congressman John Kline proposed the Smarter Solutions for Students Act, which was very similar to the previous suggestion. Kline’s bill would set the subsidized rate at the cost of the 10-year treasury note, plus a 2.5 percent margin, and would be capped at 8.5 percent. The bill was recently approved in the House of Representatives by a vote of 221-198, but was rejected by the Senate along with the Democratic solution above.
No matter which solution you support if you have a student in or about to enter college and if they will be borrowing for their education you will want to keep informed on this matter.