Student federal loan interest rates set to double July 1

Effective July 1, interest rates on many new federal student loans are set to double.

In 2007, Congress passed a law that kept the interest rate for federal Direct Stafford Loans at 3.4 percent.

The 2007 law was set to expire last year and if Congress and policymakers had not reached a temporary deal, the rate would have doubled.

The doubled rate would have affected more than 7.4 million students who would have faced, on average, an additional $1,000 in debt.

The one-year extension enacted by Congress last year is set to expire this year. In early June of this year, lawmakers seemed to be working out another agreement to postpone or figure out a solution for interest rates but the process failed on June 6.

Currently, there is no plan of action to stop the student loan interest rates from increasing July 1. Interest rates for federal student loans for students going to college in the fall will rise from 3.4 to 6.8 percent.

Senate action related to student loan interest rates is expected July 10, but it remains unclear if action will be taken or not. In May, U.S. Secretary of Education Arne Duncan issued a statement regarding preventing student loan interest rates from doubling on July 1.

“Now is not the time to double interest rates on student loans, and we remain committed to working with Congress on a bipartisan approach to a long-term, fiscally sustainable solution that will help students and families afford higher education now and in the future,” Duncan’s statement said.

“Given the impending July 1 deadline, an extension that protects students against higher rates while Congress develops an alternative solution is another reasonable option.”

Members of the Senate hope to return to the issue after the July 4th holiday and pass a one-year extension of the status quo, another temporary solution to the issue.

“Both the President and I firmly believe college should not be reserved only for the wealthy,” Duncan’s statement said.

“All of us share responsibility for making college affordable and keeping the middle-class dream alive. There is no excuse if Congress fails to come to an agreement that prevents rates from rising suddenly in July, and we look forward to working with members of both parties to reach a solution.”