Interest rates for one of the most popular federal student loan programs are set to double Monday, increasing the overall cost of higher education and potentially forcing students to reconsider where they go to school and how they will pay for it, according to students and educators.
The interest rates on new subsidized federal Stafford student loans will increase from 3.4 percent to 6.8 percent, after lawmakers failed to agree to a compromise to keep the low interest rate before the Monday deadline. Congress' Joint Economic Committee estimates the increase will cost the average student $2,600.
"I just don't think it's right to put that burden on students when we're just trying to get an affordable education," said UMass Amherst senior Emily Hajjar of Quincy, a political science major who said she will have to pay back federal loans when she graduates. "We're supposed to be the new generation to build the economy but they expect us to pay high interest rates."
She said many of her friends have already taken into account the financial burden when choosing a school thanks to the recession, and this will not help. "They can't even get the financial aid or afford the student loans" already, she said.
While the total amount of money owed will not skyrocket on an individual level, Judy Keyes, director of financial aid for UMass Boston, said graduates will have a larger financial obligation later in life. "The effects of this are more long-term," she said.
"This could have a ripple effect for all schools across the country down the road," said Daniel Fitzgibbons, a UMass Amherst spokesman.
U.S. Sen. Elizabeth Warren has backed a bill that would keep interest rates at the current level for a year, so Congress can come up with a long-term solution. Another plan to fix the interest rate to market conditions also has been proposed.
Senators are expected to take up the proposal to extend the current rates for a year when they return to Congress on July 10.
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