"While you were refreshing SCOTUSBlog or celebrating the death of DOMA, Congress has been trying and failing to prevent interest rates on federal Stafford loans—the most popular form of college funding—from increasing from 3.4 percent to 6.8 percent," the Daily Beast reports. "The increase will affect an estimated 7 million students who plan to take or renew loans after July 1. It could force those students to pay as much as $3,834 in additional interest payments over a 10-year period. Congress can still pass retroactive legislation stopping the increase after July 1, but not before causing significant uncertainty for students. The 37 million Americans who are still paying off existing loans won’t be affected. ... Financial-aid experts are troubled by the likely increase and the congressional stalemate, but say that the student loan system in general is confusing for students and administrators and needs to be simplified. Justin Draeger, president of the National Association of Student Financial Aid Administrators, says the July 1 increase is just one part of a larger problem: a patchwork of rules and interest rates for every kind of loan. 'That’s why we think it’s so important to have a long-term, comprehensive solution as opposed to focusing in on one subset of loans,' he says. 'If we don’t get something resolved now, we’re going to lose momentum,' Draeger says, pointing out that Congress’s July 4th and August recesses are just around the corner. Draeger also emphasized that even students who won’t be affected by Monday’s increase are still borrowing at high interest rates. Eighty percent of students who take out Stafford loans subsidized by the government—the particular subset of borrowers whose rates will change on July 1—also have unsubsidized Stafford loans with interest rates of 6.8 percent. That means it will be next to impossible to avoid the high interest rates that most loans are subject to."
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Publication Date: 6/28/2013