Wednesday, April 10, 2013

Student Loan Interest Rates At Risk of Doubling ... Again

Posted By on Wed, Apr 10, 2013 at 9:59 AM

Stop us if you've heard this one before: students already struggling to afford the cost of college are about to get hit with another financial whammy, as interest rates on many student loans are set to double July 1.

Rates on government subsidized Stafford loans will rise to 6.8 percent from the current 3.4 percent unless Congress halts the change.

The same threat loomed in the summer of 2012, but Congress opted to extend the program, pushing the deadline one more year.

The average student graduates with nearly $27,000 in loan debt and the consumer advocacy group U.S. PIRG estimates that the rate hike would tack an extra $1,000 onto each loan.

Student advocates upset with the rate increase sent an issue brief to the White House claiming that the government shouldn't be profiting from student loans.

"Higher education loans are meant to subsidize the cost of higher education, not profit from them, especially at a time when students are facing record debt,” Ethan Senack, the higher education advocate at U.S. PIRG told the New York Times. "The revenue from student loans should be used to keep education affordable, and should never be used to pay down the deficit or for other federal programs."

The group is citing a February report from the Congressional Budget Office that said the federal government is making a profit of 36 cents for every dollar it lends out in student loans.

Congress is expected to take up the issue but there are no guarantees it will agree to halt the rate increase.

A Senate budget resolution, authored by Washington Democratic Sen. Patty Murray would keep the interest at 3.4 percent while many Republicans favor a variable rate.

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