WEST PALM BEACH, Fla. - Student loan interest rates could double July 1 if Congress doesn't intervene. While Washington acted last year to prevent the July increase, this year many experts predict the rate changes will take effect. Congress is divided on a solution.
If the rates go up, existing loans will not be impacted. The changes impact undergraduates taking out Direct Subsidized Loans. About 7 million undergraduates use these loans. You qualify based on financial needs.
For those students, the interest rate after school will double today's price of 3.4 percent to 6.8 percent. The loan will still be interest free while the student is in school. The government pays that interest.
So how much more money will you pay? On a ten-year repayment schedule, you would pay almost $100 more if your subsidized loan debt after the grace period was $5,000. If you owed $20,000, you would owe almost $400 more.
If rates double, you could try to get a private loan. However, most of these loans accrue interest while you are still in school.
The Consumer Financial Protection Bureau has tools to help calculate the best loan for your financial situation so you know how much you will owe before it is due.