Student loan rates double without action from Congress
Posted at: 07/01/2013 2:29 AM | Updated at: 07/01/2013 10:33 PM
Interest rates on some new federally backed loans for college students are now double what they were last week.
Subsidized Stafford loan interest rates went to 6.8 percent on Monday because Congress didn't strike a deal to keep them low. That translates to an extra $2,600 per student in costs. It affects roughly a quarter of all federal borrowers.
The effects aren't immediate, though. That's because most students sign their loan documents when they return to campus in the fall.
Lawmakers say they can return the interest rates to 3.4 percent when they return after the July 4 holiday.
The Republican-led House passed a bill before leaving town that linked student loan interest rates to the financial markets. The Democratic-led Senate, however, was unable to overcome a procedural hurdle.
What can you do about it in the meantime?
Cheryl McKeiver knows a thing or two about the cost of higher education. She is the parent of three children, who have now all graduated from college. The most recent one graduated in May with a law degree from Columbia. McKeiver, a former Citibank Bank Vice President, now oversees partnerships and collaborations for the Rochester Educational Opportunity Center under the College at Brockport. While the program is free, many students go on to two and four year colleges and need financial aid. McKeiver says the decision by lawmakers to go on holiday before voting on the student loan issue is troubling, even with talk of striking a deal to turn the rates back, retroactive to July 1.
McKeiver said, “To put it kindly, it's very disturbing that you know students are waiting to make decisions to go off to school and start their education to really invest in their own dreams and for us to say, well, 'vacation comes first, let me just step away from my office of making a decision that student loans can't double in interest rates.' That is truly troubling to me because you know we're all sitting on pins and needles waiting.”
So what do you do in the meantime? By now, most students have received their financial aid packages. Schools want a decision and the bills for the fall semester are due soon. McKeiver suggests using a financial website calculator to go over costs. Other experts say if you have a 529 college savings account, use it, before borrowing anything. Also consider tapping your 401K or a home equity line of credit.
Experts say shop around. Some banks and private lenders claim their rates are lower than unsubsidized Stafford loans. You can use sites like www.simpletuition.com