MINNEAPOLIS (WCCO) — Like many Americans, lawmakers will have this week off for the 4th of July, but that break has Minnesota college students and their parents wondering what’s next for their student loan rates.
Because the Senate failed to come to an agreement in time, the interest rate on new subsidized Stafford Loans will double Monday, from 3.4 percent to 6.8 percent. The rates on existing Stafford Loans will not change.
As it stands, 7 million students in the U.S. will see their new subsidized Stafford loan rates go up — about 200,000 of them are Minnesota college students.
It’s estimated that the average student will accrue an additional $1,000 in debt for each year Congress allows the rate to stay this high.
Undergrads and their parents new to the University of Minnesota with subsidized Stafford loans have plenty to talk about with all of this going on.
Jeff Schweitzer will have two sons in college come fall.
“A percentage here or there really does make a big difference. That interest as it compounds really has a nasty effect on the loan amounts in the end,” Schweitzer said.
Just how this interest rate battle made it this far has political sides pointing fingers. Democrats want to delay the increase for another year while they work out a long-term solution.
“We don’t believe you should pay off the debt on the backs of students and that’s what the house plan would do,” Sen. Al Franken said.
That Republican House proposal ties loan interest rates to the rate of U.S. borrowing. Minnesota Congressman John Kline introduced the bill.
In a statement, he blamed senate democrats for the standstill, saying “it’s disappointing, it’s disheartening and it’s disgraceful.”
So, students and their families will wait to see what happens and hope for a compromise.
“I would love it to get figured out. I would love for it to be figured out before tomorrow,” Schweitzer said.
There is still hope. Senators will meet July 10 to take a vote that would extend the current interest rate for another year. So, the rates would retroactively readjust if that happens.