As if it was not already easy enough before July 1st of this year for students to rack up debt from loans in order to pay for their college education, now it is becoming even more expensive.
On the first of this month interest rates on government-funded student loans will double from 3.4 percent to 6.8 percent.
The jump is as a result of Congress’ inability to agree on a methodology on student loan interest, CBS News contributor and analyst Mellody Hobson explained on “CBS This Morning.” She said, “They could come up with some kind of solution that would be retroactive to today, and so, it’s not over yet, but the bottom line is there’s a big dispute. The Democrats say, ‘Let’s delay this for one year, keep rates the way they are.’ The Republicans say, ‘Let’s not have rates jump and be out of control, but let’s come up with some method that ties the rates to real interest rates.'” (CBS News)
Does any of this sound familiar to you? If so it is because we did this same thing last summer; interest rates were scheduled to double last year. When it happened students all over the country shouted from Facebook and Twitter and called on elected officials, they made sure their message was heard: “Don’t Double My Rate.” Lawmakers then took actions and a bill was passed that extended lower interest rates until July 1, 2013.
To stop rates from doubling this year, President Obama put forward a long-term solution that cuts rates this year on nearly all new loans, ensures that all students have access to affordable repayment options, and does not charge students higher interest rate to pay for deficit reduction. But Congress failed to take action on his proposal, and interest rates went up. (whitehouse.gov)
It is too easy, and growing too common, for students to rack up $25,000 or more in student loans while trying to obtain their college education. Even after they earn their degree they typically have to spend the next several years paying off the loans. Now on top of that the rates on these loans are growing so ridiculously high that paying them off is practically impossible. It is beginning to seem like after four years and one hundred grand in tuition payments the only thing the graduates are learning is that unemployment is not just for the philosophy majors anymore.
So now, not only do the graduates have doubled percentage rates on their loans, but it is also going to be nearly impossible for them to actually find work so they can begin to pay back said loans and keep their debt from growing out of control.
You can’t find work. You can’t pay your bills. And in the greatest indignity of all, the freedom you enjoyed in your dorm room/frat house/off-campus hovel is gone, because your lack of earning power has sent you scurrying back to Mom and Dad. But look on the bright side, at least your student loan interest payments won’t soon double due to an ineffectual Congress! That kick in the ass will fall squarely upon the Class of 2014 and beyond. (Forbes)
The rate increase does not affect many students right away; loan documents are generally signed just before students return to campus, and few students returned to school over the July Fourth holiday. Existing loans were not affected, either.
However, absent congressional action in the coming weeks, the increase could spell an extra $2,600 for an average student returning to campus this fall, according to Congress’ Joint Economic Committee. (denverpost.com)
The best advice out there when it comes to seeking an education is to remain financially aware of what you are getting yourself into. There are ways to pursue a college education without breaking the bank, even with the new interest rate increase. Use scholarships and grants to your advantage. Also, when and if you do absolutely have to take out a student loan then only get it for the bare minimum amount. Do not get into more debt than absolutely necessary.