Student loan interest rates set to double - WQOW TV: Eau Claire, WI NEWS18 News, Weather, and Sports

Student loan interest rates set to double

MADISON (WKOW) -- Seven million college students could soon be paying more for their loans unless Congress acts in less than a week.

American college grads already carry a staggering student loan debt in excess of $1 trillion. As tuition costs continue to soar, rising interest rates could become the next headache facing new grads.

Right now the interest rate for need-based or Stafford loans is fixed at 3.4 percent, but if Congress does not act to extend that rate by July 1, it is scheduled to double to 6.8 percent. 

"The reward for the hard work and responsibility of students and graduates of technical college, universities and job training programs is no longer a ticket to the middle class, it is instead a multi-decade debt sentence," Scot Ross, the executive director for One Wisconsin Institute, said.

The House recently passed a bill that would prevent the July increase by linking student interest rates to the 10-year treasury note. That means they would vary from year to year, fluctuating according to market forces. 

The Senate is working on their own plan though. Senate Democrats want to keep the rates at the lower 3.4 percent for at least the next two years.

According to new, national research by One Wisconsin Initiative, the rising student loan debt will have a significant ripple effect on the economy, specifically lower rates of home ownership and new automobile purchasing.

"American families are increasingly being squeezed by student loan debt," Ross said. "Instead of their money going to drivers of economic recovery like new auto and home purchases, it's going to pay off the big banks and the federal government. That's no good for any of us, whether you have student loan debt or not."

Ross joined us on 27 news at 5 on Wednesday to talk about the upcoming deadline for Congress.

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