While interest rates on federal Stafford loans have stepped down over the last several years from 6.8% in 2007 to 3.4% for the current school year, that number is set to bounce all the way back up to 6.8% on July 1, leading 130,000 students to deliver letters to lawmakers in protest.
That could come out to thousands of extra dollars over the life of the loan. It could also make it more difficult for students to pay the loan back, especially as they enter a job market that doesn’t pay as well as it did a decade ago.
Connecticut Congressman Joe Courtney has sponsored a bill that would extend the low interest rates.
“We’ve got 110 days to fix this problem,” he said during today’s rally on the Capitol steps. “Middle class families, every single day, are struggling in terms of making sure their kids have a chance to succeed in life.”
The Federal Reserve says that student loan debt now stands at $870 billion, making it larger than either credit card or car loan debt. While recent reports show that an increasing number of college graduates have been defaulting on their loans.
With parents of many college-age children already struggling to pay for tuition, student loans have become a necessity, but between the job market and the threat of increased interest rates some students worry that they could be putting their foot into a financial bear trap by taking out a loan.
“Even though graduation is several years away, I am worried about the amount of debt I will have,” said one student at today’s rally. “If interest rates double, the extra debt might also impact my ability to pay basic expenses like rent.”
Students lobby to keep interest rates lower [CNN Money]