Interest Rates on Federal Student Loans Set to Double
Federal Stafford student loans doubled on July 1, from 3.4 percent to 6.8 percent, after Congress failed to extend a 2007 law that previously cut rates.
This increase will affect an estimated 7.4 million university students and cost them an additional $2,600. The soaring debt could leave college students with a ball and chain on their economic freedom that may make it difficult to buy a house and start families.
Student debt has disproportionately affected African-American student loan borrowers: 27 percent of Black bachelor’s degree recipients compared to 16 percent of white degree holders have high student loan debt, according to a 2010 College Board study. High debt is considered an amount over $30,500.
Congress may reach a new deal toward the end of the summer, but this may be unlikely.
NBC News reports:
"It is possible for them to make a retroactive change, but only if the loans have not yet been disbursed," says Mark Kantrowitz, senior vice president and publisher of Edvisors.com. "So they could make a retroactive change if the US Department of Education delays the disbursement. But I doubt Congress will reach an agreement after July 1, as they are still too far apart."
More than 7 million undergraduates receive subsidized Stafford loans, for which the federal government pays the interest while the students are enrolled in school.
But the nation's student debt crisis affects so many more.
More than 38 million Americans have student loan debt, totaling nearly $1 trillion, a staggering number that has quadrupled in 10 years and keeps rising. Student loan debt now surpasses credit card and auto loan debt in this country — and it's only expected to get worse before it gets better.
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