Students taking the government-subsidized Stafford loans will now pay an average additional of $2,600 for their interests.
WASHINGTON – Some students and parents are disappointed that Congress didn’t act to prevent interest rates on federal student loans from doubling starting Monday.
Interest rates on government subsidized Stafford loans will jump from 3.4 percent to 6.8 percent. About 7 million young people will be affected. According to Congress’ Joint Economic Committee, the average borrower will pay an additional $2,600.
“It’s going to be not fun,” said Miguel Mejai, of Round Lake, Ill., who will start undergraduate study at George Washington University this fall. He is taking out $9,000 in student loans for his first year only, including some Stafford loans. “When graduating college and looking for a job, the last thing we need is having real life hit us harder.”
Before the Congress recessed for July 4, there were two options put forward to tackle the interest rate increase: Both would link the interest rate to market rates, which critics say would mean students could eventually pay even more due to inflation and market fluctuation. As an alternative, Senate Majority Leader Harry Reid wanted to hold the current rates intact for one more year to allow more time to gain consensus on a long-term plan.
Most students who have a Stafford loan are from families with an annual income of less than $50,000.
Research put together by the College Board Advocacy and Policy Center suggested that the number of Stafford loan borrowers doubled to more than 10 million 2011-12 academic year compared with the same period a decade earlier.
“I will exhaust all options before turning to student loans,” said Charmaine Dumont, who is sending her son to George Washington University this fall. She criticized the latest jump as a “deterrent” to students pursuing a higher education.
“Most people go to college because they think they will have a better life,” she said. “But then you get out of school and graduate with this degree and you are in the hole for thousands of dollars. How is that better?”
Dumont spoke from personal experience. She is still paying approximately $900 per month for her graduate school loans. Expecting to pay for another 10 years, “I would hate to see my child start out his life that way,” Dumont said.
Ann Wightman, a Dayton, Ohio, mother whose daughter is in college, responded quickly after she knew about the congressional “meltdown.”
“I rushed around, scrambled on Friday to get our master promissory note signed and the process in place for loans with the hope that the rates will either be reduced or fixed at what they currently are retroactively.”
Some borrowers, however, were less hopeful.
“I’m not sure if something is going to pass (when Congress returns), and even if something does pass, if it’s even going to help,” Mejai said
And Dumont said she worried that it will be hard to reduce the rate now that it’s increased.
“It’s so much difficult – once the decision has been made – to go back and reverse it,” Dumont said. “It’s doubled and it will stay that way – it will be nice if I’m surprised.”