Student loan deadline: Rate to double?
Updated On: Jun 20 2013 05:56:52 PM EDT
Millions of families hoping to send a bright young student to college are facing a financial cliffhanger.
If Congress doesn't act by July 1st, the interest rate in federally subsidized Stafford loans will jump from 3.4 percent to 6.8 percent.
Students at Wayne State told Ruth to the Rescue they are concerned about the potential jump in interest rates.
"I think that when the student loan rates are doubling you're making a situation that is already so bad even worse. It's already so expensive and so difficult for people to save up enough money or get loans to be able to attend college," said student Lyndsey Reich, of St. Clair Shores.
"I'm unhappy about it as well, it is very tough out there these days for a student, and it seems like nobody, no politician cares about students, they care about nobody my age, and we have no voice in Congress," said Jake Riley, of Grosse Pointe.
Impact on Students
Local financial expert Tom Hakim says if interest rates do double, college students who take those loans will pay a high price.
"The average student based on doubling the interest rate would pay approximately $1000 more per year," Hakim told Ruth to the Rescue.
Congress passed legislation in 2007 to lower interest rates on subsidized Stafford loans. That legislative expired last year, but Congress passed a one year extension that will expire on July 1st. Lawmakers in both parties say something should be done.
"I don't want what game is going on, this fake fight that is being picked, but it's not fair to these students," said Republican House Speaker John Boehner. President Obama has publicly pushed for an end to the stalemate, but with no luck so far.
Changing College Plans
Hakim says the already high cost of college and uncertainty over interest rates should change how students approach their education.
"I think the day of just going to college and saying when i get there, I'm going to figure out what I want to be. I think those days are long behind us," said the financial expert based in Macomb.
Hakim also advises students consider how their loans will affect their post-college expenses. "You have to do a little pre-budgeting and say I'm going to also owe this money, so I may have to put the Mustang on hold!"
Many analysts worry the student loan debt problem could be the next major financial crisis facing the United States. Hakim agrees. He worried that young people will keep piling debt on top of debt: student loans, mortgages, and cars.
"What you saw in the housing industry, which was young hard-working couples walking away from mortgages. At what point are we going to push them over the top to walk away from debt? That's scary!" he said.
By the way, the interest rate increase will only affect loans made after July 1st. Still, millions of families are keeping an anxious eye on Congress and their students' financial futures.