Congress took no action so the interest rate on federal Stafford loans rose as of 12:01am July 1, 2013. We’re still here to tell the tale.
It was like a summer blockbuster movie, complete with heroes and villains, the halls of power, and tension right up to the last second.
The media jumped all over it, trying to wipe the public into a frenzy.
The funny thing is that most people I spoke with didn’t know or care that student loan rates were going to jump as of July 1, 2013.
In case you don’t know, the rate on federal Subsidized Stafford loans went from 3.4 percent interest to 6.8 percent interest on Monday, July 1, 2013. Congress could have prevented the leap, but ended up bickering like an old married couple.
The cost of this monumental inaction? About $4,598.77 per student.
More Reasons It’s Not A Huge Deal
The interest rate was set to rise on new subsidized Stafford loans only.
Existing loans remain untouched.
New unsubsidized Stafford loans, PLUS loans, Perkins loans, and private loans remain untouched.
As of now, the most you can get in subsidized Stafford loans over your entire education is $23,000.
How The Interest Rate Affects New Borrowers
At 3.4%, you’ll pay $4,163.40 in interest over a 10-year repayment term.
At 6.8%, you’ll pay $8,762.17 in interest over a 10-year repayment term.
It comes out to $38.23 per payment.
It’s a difference, but not a monumental one that shatters the record books.
Get Angry About Something More Productive
If you come out of school with student loans, you’re likely in trouble anyway. Your income doesn’t keep pace with the cost of living, jobs are scarce, and all but a few at the top of the academic ladder are pulling down enough money to pay the student loans and groceries.
Rather than looking at the interest rate, consider some of the repayment options available to federal student loan borrowers.
Make some noise with your Congressional representatives to prod them into creating some protections for you on the private student loan front.
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