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Student loan interest rates double

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Posted: Monday, July 1, 2013 6:00 pm | Updated: 11:28 am, Tue Jul 2, 2013.

College students relying on loans took at hit on July 1, when federal subsidized loan rates doubled.

Stafford loans jumped from 3.4 percent to 6.8 percent, but Congress still has a chance to keep it at 3.4 when it reconvenes after July 4.

The estimated cost increase for students would be around $2,600, according to Congress' Joint Economic Committee, based on calculations of the average federal student loan rate of $3,385 times 6.8 percent. 

Increasing loans leave many students in a bind, said UT System Chancellor Francisco G. Cigarroa, M.D., in a news release.

“It’s very disappointing that an agreement was not reached in time to avoid this huge increase in interest rates, which will no doubt create hardship for thousands of college students,” Cigarroa said.

The average UTA graduate owes about $22,000 in student loans, compared to the national average of $26,000, according to a university spokesperson. Approximately 15,000 UTA students qualify for subsidized loans, the spokesperson said.

Congress knew about the potential rate increase since November 2012, but never changed it.

For the first time, Americans owe more money in student loans than credit card debt. Student loan debt exceeds more than $1 trillion, according to www.barackobama.com, President Barack Obama’s  re-election website.

More than 7 million students took out federal student loans during the 2012-2013 school year, according to the website.

Allan Saxe, political science associate professor, said the government could change the loan rate at any time.

Shakeela Hunter, Student Money Management Center director, told The Shorthorn in June that students should take out loans as a last resort paying for school.

“Always, always try to get free money up front before you have to look into taking out the student loans, because the student loans should be what completes your budget for college,” Hunter said.

@GusContreras21

gcontreras@mavs.uta.edu

Correction: The original version of this story said Allen Saxe is a political science professor. He is a political science associate professor.

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2 comments:

  • HunterxHunter posted at 7:13 pm on Fri, Jul 5, 2013.

    HunterxHunter Posts: 10

    General rule of thumb is have a backup, just depending on a degree really isn't enough to fall back on these days. Congress will extend loans for another year although the u.s. will probably do what Europe is doing and bulking loans into bonds and having private firms buy them off. Right now there isn't much incentive for any investors too buy as outstanding debt is seen as toxic and would have to wait 20-30 years to see any kind of return assuming BRICS doesnt dump on the U.S. and killing off the dollar. End result would be for gov to raise interest on loan higher than what the current inflation rate is, maybe the finance sector will move back to RPI since it measures higher rates :P

     
  • ChrisB posted at 12:36 pm on Wed, Jul 3, 2013.

    ChrisB Posts: 2

    I currently pay two different interest rates on my student loans and am fortunate to have a job where I can pay up several months on my loans. The current payback schedule for my loans is ten years, but I have put myself in a position to pay them back in less than 3 years. Indecision, IMHO, is worse than making a bad decision, since the bad decision was at least made by someone with the courage to make a decision in the first place and who can then, having learned from his bad decision, make a better decision. I'll vote for the more decisive candidate in the next election.

     

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