Students Worry as Loan Interest Rate Increase Nears
COLUMBIA - The U.S. Senate will vote this week on proposals to avoid an increased interest rate on federally subsidized student loans.
Currently, the interest rate on these loans is 3.4 percent. If no proposals are passed, the interest rate will double to 6.8 percent on new loans taken out after July 1. This equals an approximate $1,000 increase in the lifetime cost of each loan taken out.
MU student Kayla Erney uses her loans for tuition, housing and food. She said she doesn't have the money to cover new loans at increased interest rates.
"Once I graduate, it will probably be loans to pay off loans to pay off loans to pay off loans," she said. "It's definitely going to be a long process--lots of debt."
Students can take out federally subsidized or unsubsidized student loans. Private loans from banks and financial companies are also available. Interest does not accrue on federally subsidized loans during the time a student is in school, while interest builds up on unsubsidized loans from the moment they are taken out. The interest rate increase in question in Congress applies to federally subsidized student loans.
Sen. Claire McCaskill, D- Mo., is co-sponsoring an alternative student loan reform bill with Sen. Elizabeth Warren, D- Mass. The bill would set the interest rate for federally subsidized student loans at .75 percent, the same interest rate that banks get from the Federal Reserve. The bill is not currently set for a vote.
Sen. Roy Blunt, R- Mo., issued this statement through his press secretary:
"We can all agree that every young American should have the opportunity to achieve a college education...I believe we should work together to achieve a bipartisan, common-sense solution that will provide permanent reform to help young Americans avoid a higher interest rate on their student loans."