NEW YORK (CBSNewYork/AP) — College students taking out new loans for the fall term will see interest rates twice what they were in the spring unless Congress fulfills its pledge to restore lower rates when it returns after the July 4 holiday.
Subsidized Stafford loans, which account for roughly a quarter of all direct federal borrowing, went from 3.4 percent interest to 6.8 percent interest on Monday. Congress’ Joint Economic Committee estimated the cost passed to students would be about $2,600.
“We already understand from analysts that people in their 20s are putting off home purchases, putting off automobile purchases, are not doing what their parents’ generations did because they have so much debt,” Sen. Jack Reed (D-R.I.) told CBS 2’s Danielle Nottingham.
Students echoed the sentiment.
“I can’t pay more,” one New York University student told 1010 WINS’ Steve Sandberg. “It’s scary enough to pay all this interest as it is and to double it, it just seems crazy.”
“We are the ones struggling to pay off tuition, and it seems unfair to put the burden on the people who are least able to shoulder it,” another student said.
Students only borrow money for one year at a time. Loans taken before Monday are not affected by the rate hike.
“The only silver lining is that relatively few borrowers take out student loans in July and early August. You really can’t take out student loans more than 10 days before the term starts,” said Terry Hartle, a top official with colleges’ lobbying operation at the American Council on Education.
Both political parties tried to blame the other for the hike and student groups complained the increase in interest rates would add to student loan debt that already surpasses credit card debt in this country.
“The federal loan program is burying them in debt. With the doubling of the interest rate, Congress is pushing student borrowers to their limit,” said Michael Russo, federal program director with consumer advocate U.S. PIRG.
Lawmakers knew for a full year the July 1 deadline was coming but were unable to strike a deal to dodge that increase. During last year’s presidential race, both parties pledged to extend the 3.4 percent interest rates for another year to avoid angering young voters.[cbs-audio url=”http://cbsnewyork.files.wordpress.com/2013/07/loans-4-sandberg-jmaloney-1.mp3″ size=”340″ download=”false” name=”Student Loan Rates Double Without Congress’ Action” artist=”1010 WINS’ Steve Sandberg reports”]
But the looming hike lacked sufficient urgency this year and Congress last week left town for the holiday without an agreement. Instead, the Democratic-led Senate pledged to revisit the issue as soon as July 10 and retroactively restore the rates for another year — into 2014, when a third of Senate seats and all House seats are up for election.
Even when lawmakers return, there’s no guarantee there will be the votes to restore the lower rates. Republicans favor a proposal that would link rates to the financial markets. Democrats prefer to extend the current rate for a year while they work out a long-term solution, Nottingham reported.
On Saturday, U.S. Reps. Carolyn Maloney, Gregory Meeks and Charles Rangel demanded Congress act immediately to stop the hike.
“Already, student debt has surpassed credit card debt as the largest area of consumer debt in our country,” Maloney said. “Many of our young people are graduating with a huge load on their backs and this means they can’t furnish an apartment or rent an apartment or buy a home or a car or invest in the economy.”
A previous attempt in the Senate to extend rates for two years failed to overcome a procedural hurdle. The House has already passed a student loan proposal.
Check Out These Other Stories From CBSNewYork.com:
- Suspect In Custody After Multiple Shootings In Maryland
- Arrest Made In Shooting Death Of NJIT Student, 2nd Suspect Still At Large
- 5 Fast Facts About The Hindenburg Disaster Of 1937
- Dog With Cancer Rescued In Emotional Adoption At Hempstead Animal Shelter
(TM and © Copyright 2013 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2013 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)