College students looking to take out new federal student loans to pay for their education might be paying a little more attention to legislative wrangling in Washington, D.C. before classes start in the fall.
That’s because interest rates for federally subsidized Stafford student loans, which account for about one-quarter of all direct federal borrowing, effectively doubled today. It happened after Congress did not act to keep rates at 3.4 percent before Monday’s deadline, according to the Associated Press. The AP said Congress estimates the cost passed to students would be $2,600.
Loan rates are now at 6.8 percent but some believe students will be able to breathe easier before the fall semester begins. Congress is on vacation for the July 4 holiday, but it’s believed they will pass a bill extending the previous loan rates when they return to Capitol Hill July 10. The AP says top Democrats pledged they will retroactively extend the 3.4 percent rate after the break. If lawmakers don’t reach a deal in July, students could be in danger of paying more because Congress breaks again during August.
The new rate would only apply to students taking out new loans and not those who took one out before Monday.