Incoming college students could see their student loan interest rates double next semester if Congress doesn't take action to prevent the increase.
Interest rates on new federal Stafford loans are scheduled to increase from 3.4 percent to 6.8 percent on July 1, just as new college students are preparing for their first semester. Already, students are expressing concern over the change.
“I feel like that's a pretty big jump,” said Matthew Tran, a senior at Harding Charter Preparatory High School in Oklahoma City.
Tran, 18, plans to go to the University of Oklahoma in the fall, where he wants to major in computer science. He doesn't yet know if he'll need to take out student loans to pay for school, but he's concerned about how the change would affect his financial situation when he leaves college.
Many recent graduates already struggle to get out of debt, he said, and Tran said he's worried an increase in the interest rate could make the situation even more difficult.
A similar increase was scheduled to take effect in July 2012, but lawmakers extended the lower interest rate after President Barack Obama and officials in the U.S. Department of Education came out against allowing rates to climb.
Rate could double
Support for maintaining the lower interest rate seems to be more muted this year, said Megan McClean, managing director of policy and federal regulations for the National Association of Student Financial Aid Administrators.
“The push to keep it 3.4 was really on by this time last year,” McClean said.
Part of the reason for the decline in support is the price tag, McClean said. Last year, extending the lower interest rate cost the federal government about $6 billion, and some lawmakers would like to trim that cost.
A House budget proposal put forth by Rep. Paul Ryan, R-Wis., would allow the interest rate to double. Meanwhile, the Senate Democrats' budget proposal calls for making the current interest rate permanent.
McClean said she hopes to see lawmakers come up with a more predictable rate rather than relying on a cycle of one-year extensions. The organization is pushing for a rate that's more closely tied to the market rather than one that's written into the law without consideration for what the economy is doing, she said.
Time to think ahead
Matt Hamilton, OU's registrar and vice president for enrollment and financial services, said the change would make it all the more important for students and families to think ahead when making decisions about financial aid.
About 7,000 students are attending OU on Stafford loans this year, Hamilton said. Although incoming students wouldn't feel the effects of the increase until they begin repaying their loans after graduation, he said financial aid officials will be working to make sure they understand the terms of their loan packages.
“There is ultimately an impact that we want students and families to carefully consider,” Hamilton said. “If this happens, we will redouble our efforts to make sure they understand the impact.”