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YI and CAP Release Report: The Cost of College Will Soar if Interest Rates Allowed to Double

12:47 PM Apr 25, 2012

Unless Congress takes action, there is going to be a tremendously painful interest rate hike on Stafford loans held by 7.4 million students—one out of every three college students in the US.

On July 1st, rates for Subsidized Stafford loans will double to 6.8% from their current rate of 3.4%. This report by Young Invincibles shows just how severe the consequences of inaction will be. For every year that Congress does not act to keep interest rates low, the hike will add a $1,000 cost increase to every year of school for the average student. When tuition is already rising 8.3% per year (faster than the increasing cost of healthcare in our country), the rate hike will effectively increase the cost of college for the average borrower taking out full Subsidized Stafford loans by 20% next year.

 

Inaction will balloon the student debt for millions of students who are trying to build the skills to find a job in a still-weak economy. In a recent poll, 92% of young Democrats and 78% of young Republicans say that increasing financial aid and making loans more affordable would help make the economy stronger. Keeping the interest rate at 3.4% and taking bolder steps to keep college affordable need not be a partisan issue. The costs of college are increasing while a post-secondary education is more and more important in order for Americans to stay afloat in our own economy, and to keep America competitive with the rest of the world.

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The reason some of your loans hold a fixed itnerest rate of 6.8% is because those Federal Stafford Loans were disbursed after July 1st, 2006, when all Stafford Loans disbursed after that date were given a fixed itnerest rate.When dealing with the rest of your Student Loans, did you take out any Private Student Loans? If so, those loans would hold a different itnerest rate than your Federal Student Loans. Your Federal Student Loans which carry a Variable itnerest rate mean that every July 1st your itnerest rate is subject to change which is dictated by the Federal Government. The Federal Government sets the itnerest rate every July 1st based on what the Federal T-bill is being traded at.The only way to have your Variable itnerest rate Federal Student Loans obtain a fixed itnerest rate is through the FFELP Consolidation Loan Program. What happens is all your Federal Student Loans will be added together and based on a weighted average of your current itnerest rates; a new fixed itnerest rate will be applied to your Federal Student Loans. I hope this makes it a little more clear for you. For more information on current Federal Student Loan itnerest rates please visit the source below. Was this answer helpful?