The increase would affect federally subsidized Stafford loans, which are provided to almost 7.5 million low and moderate-income students nationwide each year. If Congress does nothing, then beginning on July 1st, the interest rate will double from 3.4% to 6.8% on new student loans.
"In today's economy, students need a college education to get ahead," said TexPIRG Advocate Melissa Cubria. "Doubling the interest rate for student loans would make this goal harder to achieve for thousands of Texans."
"I'm already going to graduate with a substantial amount of student debt," said Jeanie Donovan, a student at University of Texas-Austin. "If Congress lets the interest rate double, then I'm looking at even bigger loan payments and it's going to take longer for me to get on my feet financially after I graduate."
The average student borrower already graduates with over $25,000 in student loans. On average, the doubling of the interest rate would add approximately $1,000 for every year a student takes out a loan, adding up to more than $4,000 over a four-year education.
To stave off the rate hike, Congress needs to act by July 1st to maintain the existing interest rate. Without action, interest rates on these loans will double, resulting in significant new debt for future graduates. A vote on the issue is scheduled in the United States Senate for Tuesday.