Students around the country will see a massive student loan interest rate increase next week if Congress is unable to act before the end of the week.
The current rate of 3.4 percent will double to 6.8 percent for federal student loans on July 1.
“Looking at the rate doubling, we would estimate that to be an $8 to $10 increase in payment per month on a student loan,” said Rob Wirt, director of financial aid, scholarships and outreach.
Wirt added that most students take about 10 years to pay back their student loans, but depending on how much money graduates earn, the payments can stretch out to many more years, making the impact of this rate increase greater.
According to Wirt’s data, the average Ball State student can expect to pay $1,200 more on loans in the 10 years in takes to pay them back. And, if the loan is extended through other repayment plans, the costs increases.
Data analysis done by the Project on Student Debt found that 70 percent of Ball State students graduate with some student debt. In the same study, the group found that Cardinals on average owe $25,667 after graduation, just below the national average of $26,000.
Graduates leaving school with Ball State’s average $25,667 in debt can expect to pay more than $35,000 for their education. With only two days for Congress to reach an agreement, it looks unlikely that they will in time. But these changes aren’t set in stone.
Wirt said lawmakers will discuss the rates again in the future, which would allow Congress to adjust them again.
“Those rates might be good for a year or two,” Wirt said. “Then they will come back and look at them again. They’re talking about going to a kind of variable rate in the future, something that would be tied to market interest rates. That’s always out there. Financial aid is an ever-changing landscape.”
The rate increase would only affect loans given after the July 1 change, allowing the rate for graduates and former students to stay at 3.4 percent.
“[The rate increase] means that the average student with those loans will rack up an additional $1,000 in debt,” said President Barack Obama in a speech on May 31. “That’s like a $1,000 tax hike.”
In his speech, Obama urged lawmakers to extend the current rate to help struggling graduates stay afloat in the rough economy.
“It’s up to us now to carry forward that tradition,” Obama said. “Higher education cannot be a luxury for a privileged few. It is an economic necessity that every family should be able to afford, every young person with dreams and ambition should be able to access. And now is not the time for us to turn back on young people. Now is not the time to slash the investments that help us grow.”
The Associated Press reported Wednesday that Sen. Harry Reid of Nevada said he couldn’t back a plan being proposed that doesn’t include stronger protections for students and parents. A bipartisan group announced the plan that would move forward Thursday, which links student loan interest rates to financial markets.
