A sad reality has hit the more than seven million students who are looking to take Stafford loans this coming school year -- their interest rates has just doubled.
On Monday, news broke out that the U.S. Congress has failed to act on the federal student loan measures being posted, bringing the interest rate from 3.4 percent to 6.8 percent. According to The Christian Science Monitor, Stafford Loans are the most popular federal student loan program in the country.
The increase will affect loans to be made after July 1. ABC Local reports that for every $10,000 loan to be paid in 10 years at 3.4 percent, the total cost will be $11,810.17. However, with the new loan scheme, students looking to acquire the federal government's loan at the same amount and payment length, will have to pay a total of $13,809.64.
The loan interest rate was actually posted at 6.8 percent back then, but in 2008, Congress made it more affordable by lowering it to 3.4. However, since the Congress failed to work on the measures, the interest rate increased to 6.8 again.
The CS Monitor notes that this move could hurt the government, instead of helping it make the loan more sustainable. According to the report, basing on the rules of the loan program, interest payments will be so high that low-income debtors will have their loans discharged just after a few payments.
"The way the program is currently constructed, the number of people who qualify for loan forgiveness is large relative to the number the government assumes will use the program," Barclays analyst Cooper Howes explained to CS Monitor. "Even for those who have modest incomes, if they have large enough loans, they have large amounts forgiven."
On the other hand, Dr. Patricia Hurley of the Glendale Community College, even with the higher interest rates, the federal loan is still a good option for students.
"Federal loans still have some benefits for students," Hurley told ABC. "There are forgiveness provisions, they're working with the government rather than a commercial lender, so we still think that student loans are a better bet for students than a private loan."