Student Loan Rates Set to Increase, Yet Again

If Congress doesn’t act soon, the interest rate on student loans could increase dramatically. Yes, this is happening yet again. Back in June the president proposed extending 3.4 percent student loan interest rate for Subsidized Stafford Loans for another year. Eventually, after much partisan wrangling, it happened, and Congress agreed to extend the interest rate.

This may result in some great partisan debate, but it’s actually not that important for real college students.

It looks important, though. According to the Associated Press:

The rate for subsidized Stafford loans is set to increase from 3.4 percent to 6.8 percent on July 1, just as millions of new college students start signing up for fall courses. The difference between the two rates adds up to $6 billion.

So is this a crisis? The AP writes “Congressional inaction could end up costing college students an extra $5,000 on their new loans.” This is true, but that $5,000 would, frankly, not be all that painful to college students.

The difference between a 3.4 percent and 6.8 percent interest rate adds up to $5,000 over the lifetime of the loan, sure, but that $5,000 means, at most, an extra $9 a month.

That’s like two beers.

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Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer