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College Loan Interest Rates Set To Double, Unless Congress Acts Quickly

Students Frustrated, Wonder How They'll Ever Be Productive With So Much Debt

NEW YORK (CBSNewYork) — With the clock ticking, Congress appears deadlocked on a bill to keep student loan interest rates from doubling.

It may soon get more expensive to finance your college education. Congress has another battle coming to a head and if lawmakers don’t make a deal by Friday, interest rates will jump in millions of student loans, CBS 2’s Alexi Christoforous reported Thursday.

Senate Democrats came out with a new proposal to prevent interest rates on student loans from doubling.

“This legislation would simply extend the rate of 3.4 percent — the rate we have today for need-based loans,” said Sen. Jack Reed (D-R.I.).

At issue are the government’s Stafford subsidized loans, which come with an interest rate of 3.4 percent. As of July 1, that rate is scheduled to jump to 6.8 percent for new loans. Existing loans would not change. Democrats want to delay that increase for a year while they work out a long-term solution.

“Young people are hurt by student loan debt and in turn that hurts the economy,” said Sen. Elizabeth Warren (D-Mass.).

About a quarter of all student borrowers have the subsidized loans that Congress is talking about. Without a deal, nearly 7.5 million students will see their rates jump.

“How are people supposed to become productive members of society if they have so many debts to pay? Really, it’s just going to hurt the country in the long run,” one student said.

A separate bipartisan proposal would tie new loans to the rate on 10-year treasury bonds. That would keep rates low for now. But they could climb in future years, and without a cap on how high they could go.

As that plan started losing support, the finger pointing began.

“This is not a gaming matter. We have got to get serious now, stop playing games,” House Majority Leader Eric Cantor said.

And they’re quickly running out of time. Congress has just one day left before breaking for the July 4 holiday.

College graduates carry an average debt of $27,000. If that rate hike does go into effect Monday, they’ll be paying an extra $1,000 for each year of college.

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