KCBS Cover Story: Interest Rate Hike Imminent On Thousands Of Student Loans
SAN FRANCISCO (KCBS) – The clock is ticking for students who have taken out subsidized federal loans for college as an interest rate reduction is set to expire.
In California, over 572,000 students have taken out federally subsidized Stafford Loans. The loans were made more affordable in 2007 when Congress lowered the interest rate from 6.8 percent to 3.4 percent, but that reduction is set to expire at the end of June.
At San Francisco State University’s financial aid office, student Misty Johnson expressed concern about what the doubling interest rate will mean for her ability to repay her student loans.
“Over time that’s going to definitely add up when you have $30,000 to $40,000 in student loans already,” said Johnson. “It’s pretty scary.”
Barbara Hubler, the director of financial aid at SFSU said that about 12,500 students are utilizing the subsidized Stafford Loans, which defers payment until six months after they leave school.
KCBS’ Susan Kennedy Reports:
“They’re not going to feel it right away because they will get a subsidized loan for next year, however, when they go into repayment, the interest rate will be up to 6.8 percent on their outstanding balance,” said Hubler.
Tuesday, President Obama was to promote an extension of the student loan interest rate, a proposal also supported by his GOP presidential candidate Mitt Romney.
Democrats plan to introduce legislation to keep the subsidized Stafford Loans available at 3.4 percent for at least another year. While 77 Republicans voted for the original bill, Rep. John Kline (R-Minnesota) said that he expects that this time there will be more of a party line vote.
“We simply can’t keep providing money from the federal government in the form of subsidized or actual loans when we don’t have the money,” said Kline.
The cost of extending the program for a year is estimated to be $6 billion.
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