Rising Interest Rates on Student Loans

?Aspiring college applicants face problems on the horizon as the legislation approving lower student loan interest rates is set to expire this year on July 1st.

A college education is always an expensive proposition, especially if you have to borrow money to make it a reality. When Congress passed legislation back in 2007 to entice more students to go to college, it approved a law lowering the interest rates on subsidized student loans from 6.8 percent to 3.4 percent, and more aspiring college applicants were able to get into the schools they wanted to attend. The situation was good for both the students and the schools at the time, but now there is a new problem on the near horizon as the legislation approving the lower student loan interest rates is set to expire this year on July 1st.

This year, both Democrats and Republicans have said they would like to see the low interest rates extended. However, when the Democrats drafted a bill that would extend the lower interest rates for another year, it was blocked in the Senate by Republicans who complained that the Democrats interest in the bill was only due to that party trying to garner more of the student vote in an election year. Now the legislation to lower the interest rates on student loans hangs in limbo as both students and financial aid officials at the schools begin to prepare for what looks like an inevitable increase in interest rates.

The national average debt for all forms of loans for a college student upon graduation is currently $25,000, and if the extension of lower rates is not approved, the average student will likely see an increase of $1,000 in interest costs. Some college administrators believe the interest rate increases won’t stop students from taking out student loans, but that it could strain students more after graduation when they have a more difficult time paying off loans with the higher interest rate. The Senate now has until July 1st to work out a solution for the interest rate extension and many college tuition watchers are fairly certain that some sort of compromise will eventually be found because neither the Democrats or the Republicans are eager to tell their student voting constituents that they failed to work a compromise and had to increase the interest rate on all forms of federally-backed student loans. A good compromise solution before July 1st would be nice, but even if one is reached, there are no guarantees what will happen to student loan interest rates in the years to follow, especially when there is no election cycle to keep our legislators a bit more honest and open.