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Reform Student Loans, But Don’t Let Interest Rates Skyrocket

An Overview of The Impact of Recent Loan Proposals on Students 

If Congress fails to act, interest rates will double on July 1st from 3.4 percent to 6.8 percent for subsidized Stafford loans for more than 7 million college students – at a time when the federal government is projected to earn $51 billion in profit off of the student loan program in the next year. This would increase the cost of borrowing money for school for some of the country’s neediest students. Last spring, students fought and won a battle to prevent interest rates from doubling, but Congress only fixed the problem for a year. We once again urge Congress to protect students by keeping interest rates affordable.

Many proposals would calculate interest rates based on market conditions. However, without the protection of a cap, shifting to a market-based rate could be disastrous for students. For example, if economy wide interest rates rise to 10 percent, as they have in the past, that could spike loan costs and deter students from going to college at all. If rates are tied to the market, they must have meaningful caps and keep rates low in the longterm. If Congress cannot come together, we urge them to extend the current interest rate. Below, we compare some of the many proposals put forward by Congress to address the issue.

Interest Rate Factsheet-Final-6.6.13_Page_1Interest Rate Factsheet-Final-6.6.13_Page_2

Click here to download the full fact sheet.