Student Loan Interest Rates Set To Double To 6.8% On July 1

Interest rates on student loans are set to double to 6.8 percent on Monday due to the U.S. Senate's failure to reach a consensus to prevent a rise in federally subsidized borrowing costs before the July 1 deadline.

The Senate adjourned Thursday night for the July 4 recess without approving a student loan rate package that would maintain the current 3.4 percent rate.  As a result, millions of college students already burdened by debt will face the daunting prospect that their interest rates on some Stafford loans could rise from 3.4 percent to 6.8 percent.

Although the increase is due to go into effect Monday, GOP Sen. Lamar Alexander hinted that lawmakers could still reach a consensus that would negate the increase retroactively, reports the New York Daily News.  However, Democratic lawmakers are skeptical of this measure because it will be harder to generate votes to scale the rates back without a deadline, or sense of urgency. The higher rates would add about $3,000 to the total interest on a $23,000 student loan repaid over 10 years.

"At one level it's modest, but if you have an entry-level position or can't find work, it starts to add up," Terry Hartle, senior vice president of the American Council of Education, told FoxNews.com.

Democrats have sought to keep interest on Stafford loans low, arguing that poor and middle class students need the help to get college educations. On the other hand Republicans seeking to cut government spending have proposed linking student loans to the financial markets instead of letting Congress set federal lending rates.  President Obama also included a variation of that market-based approach in the budget he sent to Congress earlier this year, but Democrats tried to block his efforts.

Senate Majority Leader Harry Reid, who is also the Democratic chairman for the Senate Education Committee, said that the plan to tie rates to the 10-year treasury note yield could never pass and that he wouldn't back something that doesn't include stronger protections for students and parents.

"There is no deal on student loans that can pass the Senate because Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families, instead of closing tax loopholes for the wealthiest Americans and big corporations," Adam Jentleson, a spokesman for Reid, told Fox News. "Senate Democrats continue to work in good faith to reach a compromise but Republicans refuse to give on this critical point."