Students face double interest rate on subsidized loans - KSFY News - Sioux Falls, SD News, Weather, Sports

Students face double interest rate on subsidized loans after Congress Fails to pass legislation

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Congress has left Washington for the July 4th holiday after failing to pass a measure to stop a 100 percent increase in subsidized student loan rates. 

Roughly seven million college students are taking subsidized federal loans this year. Subsidized loans are interest-free while a student is in school. After the College Cost Reduction and Access Act passed in 2007, subsidized loans also had lower interest rates than unsubsidized federal loans.  

That act expires July first, so any loans taken out after Monday will be subject to a 6.8 percent interest rate instead of the current 3.4 percent. 

Subsidized loans are intended to help middle and lower income families attend college.  Friday's failed legislation means many students are facing an uncertain future. 

"It's really unfortunate because I'm already thinking I'm probably going to have to be paying those loans until I'm like 40," said college senior Maddisen Mosser. 

Mosser already has about $50,000 in student loans, but she knows it's a necessary investment. 

"You pretty much don't have an option put to go to school and it's impossible to pay for it; you can't pay for it yourself," said Mosser. 

"So many people try to differentiate themselves now that I almost think you need to have a degree in this day and age," said student Cody Malik, finishing up his Master's degree in Accounting. 

Even with that in mind, most students still fear the day they have to start paying those student loans. 

"I know some people that have to pay 4 or 500 a month for it and its kind of like, wow, that's a lot," said Mosser. 

"It's definitely going to decrease my discretionary spending once I do have to start paying them back," said Malik. 

It's why the thought of having even larger monthly payments is so troubling. 

"It's about another $2500 hit over a 10 year period…it definitely has an impact, but its not such an impact that you're going to look at this change in interest rates and suddenly say college isn't worth it," said Augustana's Financial Aid Director Brenda Murtha. 

"I'm developing a good set of skills that no one can take away from me, so I'm willing to pay that extra bit of loan interest or whatever I have to sacrifice to do it because I know down the road I'm going to benefit from it tremendously," said Malik.

Other students are hoping Congress will be able to come to some kind of agreement soon. 

"My need to look at what's the better good for everybody and not, o this is not the democratic way, this is not the republican belief, and lets just argue and not agree on anything," said Malik. 

When Congress returns from their July 4th break, they could make a retroactive deal that would temporarily bring back the lower interest rates this year.  It's why Murtha says students should wait to make any major loan decisions until August.

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