When Congress failed to act on July 1, federal subsidized Stafford student loan interest rates doubled from 3.4% to 6.8%. Since then, students everywhere have been holding their breath, waiting for a solution. With tuition too high and student debt levels topping $1 trillion, paying for college is clearly a huge concern for students and their families.
Wednesday's Senate vote is yet another bump on the student-loan roller coaster ride. Long story short, this deal will earn the government an additional $715 million in profit off of students. Our generation has already been hit hard with high unemployment rates (nearly twice the national average) and skyrocketing debt levels, largely due to the Great Recession.
As with any bad news, your reaction to the student loan interest rate deal can come in different stages.
Hooray!! The Senate has struck a deal. Drinks all around, right? Before you start popping bottles to celebrate that our bipartisan reps have finally come together on anything, read the fine print. Although the interest rates on student loans will be low in the short term, interest rates could more than double in the future. The bill doesn't provide low-enough caps on how high those rates can actually go.
Although this doesn’t affect any current loans you may have, if you plan on taking out a loan next year, get ready to pay up. The cap for undergraduate loans is high, at 8.25%.
College students won’t be the only ones to suffer under this new plan. If you’re thinking about law or graduate school, under the deal, people who take out Graduate Plus loans may see interest rates soar to 9.5%.
Last, but certainly not least, parents will be hit especially hard by this deal. Interest rates for Parent Plus loans could hit as high as the double digits!
Oh this is a good idea. Not. Although America is slowly climbing out of the recession, young adults are still floundering. With youth unemployment rates at 11.7% (nearly twice the national average), it totally makes perfect sense for students, of all people, to be responsible for paying down America’s deficit.
No, your eyes aren’t playing tricks on you. This deal would mean the government would make big bucks off the back of students, $715 million to be exact, in addition to the $184 billion they were already planning on making and just locked in for good. When our generation is already struggling to get ahead, it’s infuriating that we must deal with yet another roadblock.