Student loan rates double without Congress' action

Last week on Capitol Hill, Senate Health, Education, Last week on Capitol Hill, Senate Health, Education, Labor and Pension Committee chairman Sen. Tom Harkin, (D-Iowa), left, with Sen. Jack Reed (D-R.I.), discuss a graph and legislation to try and prevent the increase in the interest rates on some student loans. (June 27, 2013) Photo Credit: AP

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College students taking out new loans for the fall term will see interest rates twice what they were in the spring -- unless Congress fulfills its pledge to restore lower rates when it returns after the July 4 holiday.

Subsidized Stafford loans, which account for roughly a quarter of all direct federal borrowing, went from 3.4 percent interest to 6.8 percent interest Monday.

Congress' Joint Economic Committee estimated the cost passed to students would be about $2,600.

"The only silver lining is that relatively few borrowers take out student loans in July and early August. You really can't take out student loans more than 10 days before the term starts," said Terry Hartle, a top official with colleges' lobbying operation at the American Council on Education.

But that is little consolation for students taking summer classes or lawmakers facing stinging criticism for inaction.

Both political parties tried to blame the other for the hike and student groups complained the increase in interest rates would add to student loan debt that already surpasses credit card debt in this country.

"The federal loan program is burying them in debt. With the doubling of the interest rate, Congress is pushing student borrowers to their limit," said Michael Russo, federal program director with consumer advocate U.S. PIRG.

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Lawmakers knew for a full year the July 1 deadline was coming but were unable to strike a deal to dodge that increase.

During last year's presidential race, both parties pledged to extend the 3.4 percent interest rates for another year.

But the looming hike lacked sufficient urgency this year and Congress last week left town for the holiday without an agreement. -- AP

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