Congressional Action Needed to Prevent Interest Rate Hike
If Congress fails to extend the low 3.4 percent interest rate on federal student loans for undergraduates, the rate will double on July 1, to 6.8 percent, affecting close to 8 million student borrowers. Estimates vary, but some will pay $1000 more in interest.
The 3.4 percent interest rate was established by the College Cost Reduction and Access Act (CCRAA), of Income-Based Repayment and Public Service Loan Forgiveness fame. Rates were reduced over 4 years to 3.4, and are set to increase to 6.8 percent this July.
President Obama and Secretary of Education Duncan are calling on Congress to freeze the rate for one year, preventing the jump. Indeed, Congress must act to prevent this interest rate yike. Additionally, Congress and the Administration must take steps to shore up the important Pell program for low-income students.