Interest rates on federal student loans double to 6.8%, but Congress could pass a retroactive fix. Democrats want a short-term rate extension while a bipartisan group seeks a long-term solution.
By Marina Villeneuve
July 9, 2013, 5:00 a.m.
WASHINGTON — Antonya Bruno, a senior at Howard University, has used the maximum amount of federal loans over the last three years to help pay her steadily climbing tuition.
“It’s been very helpful,” she said, happy that she has avoided taking out more expensive private loans.
Because of a political stalemate, however, Bruno will see the interest rate on her new loans double to 6.8% unless Congress can pass a retroactive fix. It could add $1,000 over the life of her loans, and cost new students four times as much.
“It’s tough to know interest rates will go up, but I’m glad it’s at least not for all four of my years,” said Bruno, who has paid internships during the school year. “I feel bad for people who are now entering college, who will have to pay more than I ever will.”
Bruno and students all over the country are the victims of an impasse cutting across party lines in Congress that led to the rate increase, effective July 1.
Some Democrats are pushing for a short-term extension of low rates, while a bipartisan group of senators is seeking support for different variations of a proposal to deal with the problem over the long term by linking interest rates to the bond market. That long-term change, a central idea of recent proposals by Republicans, Democrats and the White House, would tie all federal student loan interest rates to the government’s cost of borrowing.
This could help student and family borrowers by offering low rates and getting the matter out of the political arena, according to University of Michigan professor Susan Dynarski and Indiana University professor Don Hossler, both experts on higher education.
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