The worst fears of many student borrowers have just come true.
Interest rates for subsidized Stafford student loans doubled to 6.8% Monday, as Congress failed yet again to agree on how to address the long-term problem of graduate debt.
Though only loans taken out after July 1 will be subject to the increased rates, the average borrower could pay an additional $761 for each new subsidized federal loan, Mark Kantrowitz, a financial aid expert and publisher of Edvisors Network, told MSNBC. And close to 8 million students per year could potentially be affected, according to an estimate by the National Association of Student Financial Aid Administrators.
An excess of private loans is often to blame for extreme student debt, but graduates all over the nation are feeling the hurt. Student loans passed credit cards as the leading cause of debt in the U.S. in 2012, hitting $1 trillion.
What Can Congress Do?
But all hope is not lost—Congress could still retroactively reverse the increase, and bring the rate back to 3.4%. But Senate members seemed to feel little pressure to do so before leaving for the July 4th holiday. Subsidized Stafford loans only account for 26% of all student loans, and most students won’t look to borrow until August or September.
Democrats and the White House have said the rate will return to its previous level before the fall.
But Congress is unlikely to enact any changes until after their August recess, when may student borrowers will already have taken out loans at the higher rate, wrote Beth Maglione, a spokesperson for the National Association of Student Financial Aid Administrators, in an email.
“Chances are, by that time we have lost momentum for any legislative changes,” Maglione wrote.
With the fall semester inching closer, lawmakers—and students—are running out of time.
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