Some student loan interest rates double, Congress may intervene

July 02, 2013|By Stuart Pfeifer

University of Iowa student Angie Platt said student loan rate hike "doesn't… (Ryan J. Foley / Associated…)

Interest rates on some student loans doubled to nearly 7% Tuesday after Congress failed to reach a last-minute compromise.

The interest rates on federally subsidized Stafford loans jumped from 3.4% to 6.8% but could be reduced when lawmakers return from the Fourth of July holiday.

Lawmakers from both parties, as well as the White House, vowed to lower that rate before students start signing loan documents this fall. The rate now stands higher than that of most loans available from private lenders, the Associated Press reported.

"In the grand scheme of all the loans that I already have, I suppose it's not out of control," Angie Platt, a 20-year-old University of Iowa student, told AP. "It's just another thing to add on. It doesn't help me, that's for sure.”

Efforts to keep interest rates from doubling on new subsidized Stafford loans fell apart last week amid partisan wrangling in the Senate. Democratic senators and the White House both predicted 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. Congress' Joint Economic Committee estimated the cost passed to students would be about $2,600.

"It's kind of surprising — that's a big jump," said Rebecca Ehlers, an Iowa State University senior majoring in math.

At the White House, a spokesman predicted a deal could be reached before students return to campus.

"We are confident they will get there and that the solution will include retroactive protection for students who borrow after July 1 so that their student loan rates don't double," Matt Lehrich said.

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