Student loan rates set to double July 1

There doesn't appear to be any real movement to halt the increase, which could affect more than 7 million borrowers.

By Kim Peterson Jun 27, 2013 1:39PM
Unless a last-minute deal is made, millions of college students will see their loan rates double on July 1 to 6.8%.

In the past, lawmakers have swooped in to extend low rates for students, or at least delay any increase. But this time around, there doesn't appear to be much political will to do that.
More than 7 million students have the federal Stafford loans that would be subject to the rate increase. Democrats set the rate at 3.4% before Republicans took control of the House in 2011, The New York Times reports. Republicans extended the low rate for one year last June, but it doesn't look as if they'll do it this year.

Lawmakers on both sides have tried to make political hay over the issue. Democrats are painting Republicans as the bad guys for allowing the rate increase through. Republicans say the market, not politicians, should set loan rates, and they have proposed legislation that would reset student rates each year with an 8.5% cap.Image: Graduation cap (© Stockdisc/SuperStock)

The Republican bill would cut the budget by $3.7 billion over 10 years, the Times reported. Then President Barack Obama unveiled his own proposal, which was similar to what the Republicans wanted.

Now the issue has stalled and lawmakers on both sides of the aisle are distracted by immigration and other hot-button issues.

Wednesday, five senators -- including three Republicans, an independent and one Democrat -- began pushing new legislation that would fix student loans to the 10-year U.S. Treasury rate. But Democrats are howling because that proposal doesn't have any caps.

Meanwhile, two Democratic senators are preparing a new bill that would freeze the 3.4% rate for one more year while Congress hammers out an agreement. But that bill probably won't see a vote until later in July.

Luckily, the Times reported, many students don't sign for new loans until August, so there is some time to work on a compromise.

More on moneyNOW



90Comments
Jun 27, 2013 2:29PM
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Why are mortgages at 3.5 % and student loans at 6.8 %?

Jun 27, 2013 1:55PM
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The increase will only result in more defaults in loans and less people will get a better education. The long term results will be a stupider, poorer workforce that will be less prepared to adapt to an ever changing economy
Jun 27, 2013 2:27PM
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Stupid people are easier to control. Maybe that is why the cost of education is rising and only the wealthy will be able to afford it. 
Jun 27, 2013 2:42PM
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If you can't afford to drive a Cadillac, drive a Chevy, If you can't afford to drive a Chevy, take the bus, If you can't afford to take the bus, walk.  Life is basically quite simple.  Extend this logic to higher education.  If you can't afford 125,000 per year for college, find a cheaper school.  If a bachelors degree is out of the question because of cost, find a jr college that offers something less expensive.  Still can't afford that, look for a career requiring less education, perhaps in the field of medicine.  You won't earn as much as someone with a degree but hey, not all jobs require a college education and you will still live a productive yet more conservative lifestyle.  That's life.  Getting a college education and walking away with a $250,000 or $350,000 debt is nonsense.  No student should be permitted to borrow more than $10,000 per year of higher education.  Where is the security for those loans.  With numb nuts in office we know the jobs don't exist so stop wasting time and money searching for the higher education you can't afford.  Get a job and get on with life.
Jun 27, 2013 2:16PM
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How can they justify 6.8% when interest paid on savings (CD's, etc.) is LESS THAN 1%.  Outrageous in my opinion, and I paid off my kid's student loans over 10 years ago, so I have no skin in this game.
Jun 27, 2013 2:29PM
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This is an example of your governments love for the members of our country. Other nations invest in educating their students, but America wants our students to invest in the profit making process of the banks. This is the obvious, but we refuse to unite as citizens and construct a functional government from ground up. The American people deserve what they are getting from their government, because we chose them. Divide and conquer is an effective process.
Jun 27, 2013 2:14PM
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They need to revamp student loans altogether.  Student loans need to be capped at 60%-70% of the annual cost of college, therefore making the student contribute something right away.  I know this will allow less people to go to college, but unlimited student loans leads to college costing more and way more debt accumulating that will never be paid back.  Not everyone needs to go to college, for some it's a big waste of money, taxpayer money!
Jun 27, 2013 1:59PM
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my fgsl, from 1991, is 9%. 

 

man, i can't pay that thing off still.

Jun 27, 2013 6:29PM
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I'll preference my comments by agreeing that the financial aid system needs to be revamped to make the cost of attending college fair and equitable.  That being said, it doesn't bother me that the rate is being doubled. As a parent of a full-pay student that has to take on unsubsidized loans at the higher rate of 6.8%, I believe all students should pay the same interest rate on their debt upon graduation, whether it's 3.4% or 6.8%.  After all, it's the student's debt, not the parent's debt.  Upon graduation, the playing field is level and each graduate has the same opportunity to seek gainful employment and pay back their loans.  Why are kids with parents that earn a decent living expected to pay a higher rate.  Seems unfair to me when we've already paid sticker price for our kid’s education.  I don't have a problem paying the tuition, but kids shouldn't be penalized for their parents success.

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Some countries invest in the education of their people.  America makes money on them.
Jun 27, 2013 3:24PM
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The less educated our youth, the more social welfare programs we will end up having to pay for. We have enough problems competing in this global economy.  Many other countries in the world actually provide free advanced education for their citizens and have a talented, skilled and innovative work force which contribute financially to those countries. 

It's impossible, in this day and age, to get decent paying jobs without higher education. Corporations in the high tech fields just recently persuaded Congress to allow them to "import" foreign workers on corporate sponsored "work" visas citing the lack of qualified applicants here in the US.  If more young people could afford a higher education, we wouldn't have to import talent from abroad and we'd be a richer nation for it.  If we don't, the majority of our population will one day be doing the sweat shop jobs currently found in third world countries today. 

Jun 28, 2013 10:51AM
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I think student loans can be helpful for students.  But, the colleges are greedy and soak up the demand with higher tuition to cover excessive salaries and spending.  It's really too bad there aren't more socially conscious colleges.  It seems that whenever there is a program to help some, there is always somebody to take advantage. 
Jun 27, 2013 2:19PM
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LET'S CUT THE MORTGAGE SUBSIDY, TOO.
Jun 27, 2013 2:02PM
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The government should be doing everything possible to ensure that all who seek higher education have affordable paths to get there. The future of our country is at stake.
Jun 27, 2013 2:20PM
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Let me guess road to perdition, you dont have any children or student loans your self to pay off yourself. I hate to break it to you, but in today's work world you need some sort of college education if you want to make more than minimum wage. A decent paying job with just a high school diploma is extremely hard to find anymore.
Jun 27, 2013 5:04PM
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Only 90% of college graduates are "educated".  There is a major question whether some of the others would be considered literate by older standards.  Almost no Ivy League graduate of the humanities today could stand up in debate of politics or policy without notes or devices against the top third of graduates from a public institution from 50+ years ago.

Imagine the time machine bringing ANY founder back today to debate the intellectual trash constituting our government now
Jun 29, 2013 7:01AM
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Why are the republicans/teabags always trying to screw the middle class and poor????
Jun 29, 2013 9:44AM
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The college loan bubble is about to burst just like the housing bubble. The college enrollment should drop and I hope the costs will also drop. 
Jun 29, 2013 8:08AM
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That 8.5% cap that the government thinks they are giving us as some sort of a pat on the back, I did my job, has always been in place .... That is nothing new. That is the highest adjustable rates can legally go on our existing student loans ... but it was also my understanding existing student loans could not do a double jump in 1 year ... which means they can't take a 2.36% rate and increase it to 6.8%. If they do, then the government is a bunch of freakin liars - shocker there! and then we wonder why our economy took a nose dive in the first place..... Nothing but greed and stupidity ... carma is a B!tch and she will come around again!!
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