Student Loans: Dealing with the Interest Rate Jump
Unless fortunate enough to already have the funds to pay for college, most college students will have to take out a student loan at some point within their college career. In fact, there are currently 37 million borrowers in the U.S alone. The average graduate who has obtained a Bachelor’s degree, loan debt has reached an average of $26,600. That is a lot of money!
If you are a college student, you have probably heard the news that the interest rates on government-subsidized loans has doubled from 3.4% to 6.8% after the government failed to come to an agreement by the deadline of July 1, 2013. The Senate planned a meeting to argue for a year extension on the 3.4% interest rate today so that they can review all of the proposals from the Senate, House, and President Obama. However, during the meeting, the bill requesting an extension failed to pass with a vote of 51 in favor and 49 opposed, keeping the interest rate at the increased level of 6.8%. They needed a vote of 60 in favor for the bill to pass. Many of the Senators have verbalized their frustration and disappointment of the extension failing to pass.
Today our nation’s students once again wait in vain for relief. They expected more of us and I share their disappointment.
-Senator Tom Udall, D-N.M.
— Jim Cramer (@jimcramer) July 10, 2013
Students are already struggling to pay back the loans that they have, and with the added interest rates it could cause more students to fall delinquent with their loans. According to American Student Assistance, two out of five student loan borrowers – or 41%- are delinquent at some point in the first five years after entering repayment. This increase will have an impact on 7 million college students who will be taking out a loan this school year. It is estimated that these students can look at paying an extra $17 to $24 more a month than they would if the interest rate had remained the same.
Lawmakers are planning to leave the current interest rate at the 6.8%, but have stated that there will be future negotiations to come to an agreement that will benefit our college students.
Senator Jack Reed, D-R.I., who voted for the extension, stated that he “will continue to work hard to reverse this senseless rate hike. Ultimately, we’ll need a bipartisan solution, but first Congress will have to do its homework. Republicans will have to come to the table and agree to address the bigger picture of college affordability in a meaningful and comprehensive way.”