MILLEDGEVILLE — College students taking out new loans for the fall term will see interest rates double what they were in the spring.
Subsidized Stafford loans went from 3.4 percent interest to 6.8 percent interest as of July 1. The rate increase in the loans, which are available to undergraduates from low-income families, will impact more than 7 million students and increase the cost to the average student by $2,600, according to an Associated Press report.
The rates were set to double last July 1, but Congress voted June 29 to extend the rates for one more year.
Lawmakers promised to restore lower rates when they returned this week, both retroactively and before students start signing loan documents later this summer. For now, the rate stands at 6.8 percent, which is higher than most loans available from private lenders.
Democratic senators and the White House both predicted that a deal would be reached in Congress to bring the rates down again before students return to campus.
But if an agreement remains elusive, students could find themselves saddled with higher interest rates this year than last.
Local student Shelbi Whipple is already feeling the stress of the rate increase. A working mother, wife and college student at Georgia Military College, the 6.8 percent interest increase only adds more stress to her already stressful life.
For students like Whipple, the uncertainty of it all is cause for concern.
“Being a college student is already stressful, and knowing that the pay rate is going up is going to cause more people to default on their loans and skip out on school,” said Whipple.
Although students are stuck with the federal interest rate, all hope is not lost. They still have a few choices to make when it comes to student loans. According to an Associated Press report, students can choose to accept only the necessary parts of the federal loans when they receive their financial aid award letter in the spring. If students accept the entire loan, the extra cash will be charged at the 6.8 percent interest rate.
Only interest rates on Subsidized Stafford loans will be impacted by the recent change. These loans account for roughly a quarter of all direct federal borrowing. They are need-based loans for undergraduate students only, and the loans will not accumulate interest while students are in college.
Subsidized Stafford loans go to needier students and often are coupled with other types of lending.
Whipple has just started her second year of school at GMC and plans to receive her degree in psychology sometime in 2014. As of now, she has to manage to find a way to juggle work, her 7-month-old son, Miles, her marriage, and the additional stress that comes with household bills associated with their apartment in Milledgeville. The rate increase is one more ball to juggle.
“It’s becoming ridiculously obscene,” Whipple said. “Taking out a loan and receiving financial aid is already a way of saying we can’t afford school. Raising the pay rate is just adding more stress that I for one definitely don’t need.”
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