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Student Loan Interest Rate to Double from 3.4 Percent to 6.8 Percent on July 1

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Students might have to think twice about taking out a loan for the next school year, as subsidized Stafford loans are set to double in interest from 3.4 percent to 6.8 percent on July 1.

This could mean many students will have an extra $5,000 added onto their debt.

A year ago, lawmakers had a similar deadline but were able to dodge the increased rate. 

This dodging occurred while President Barack Obama and Mitt Romney were in the midst of their presidential campaigns. But now, the White House has other things to worry about, like the budget standoffs.

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"What is definitely clear, this time around, there doesn't seem to be as much outcry," Justin Draeger, president of the National Association of Student Financial Aid Administrators, said. "We're advising our members to tell students that the interest rates are going to double on new student loans, to 6.8 percent."

It only applies to those students who take out new subsidized loans. Those who already have subsidized loans should not expect to see a rate increase unless they take out a new one. Nonsubsidized loans are also not expected to change.

Though House Education Committee Chairman John Kline said that they want to keep rates at their current levels, they have not come up with a plan on how to do so. 

Rep. Karen Bass introduced a proposal last week that would permanently max the interest rate at 3.4 percent.

The budget proposals of both sides in Congress do not specifically set aside money to keep student loan rates at their current percentage, but the Republicans' budget plan would make the interest rates double in an effort to balance federal budget in the next ten years.

Democrats said they want to keep the rates at their current level, but they passed a budget last week that does not mention it.

The money just doesn't seem to be there for either side, and if they want to keep the rates the same, they must find a way to pay for them through cuts to programs or by adding extra taxes.

"Spending is measured in numbers, not words," Jason Delisle, a former Republican staffer on the Senate Budget Committee, said. "The Murray budget does not include funding for any changes to student loans."

It comes at a time when two-thirds of students are graduating with loans totaling to more than $25,000. About one in 10 borrowers owe more than $54,000 in loans and the total student-loan debt is now more than $1 trillion. 

"Burdening students with 6.8 percent loans when interest rates in the economy are at history lows makes no sense," Lauren Asher, president of the Institute for College Access and Success, said.

Sources: Christian Science Monitor, Inquisitr