NEW YORK (CNNMoney) – Attention college students: The interest rate on federal student loans is scheduled to double this summer unless Congress acts soon.
Loans taken out for the current school year carried an interest rate of 3.4%, thanks to a 2007 law that phased in rate reductions for subsidized Stafford loans to undergraduate students. But the law did not specify the rate after this year. So unless something is done, rates will revert back to 6.8% — where they were in 2007.
President Obama urged lawmakers in his State of the Union address Tuesday to stop this rate hike from going into effect. He also asked Congress to extend the enhanced Hope Scholarship program, which increased the maximum tax credit to $2,500. And he wants to double the number of federal work-study jobs.
But it remains to be seen whether this deficit-conscious Congress will act, especially since extending the 3.4% rate would cost $5.6 billion a year, according to Mark Kantrowitz, publisher of FinAid.org. All told, Obama’s proposals would total at least $10 billion a year.
While the president has focused on expanding access to college for low- and middle-income children, lawmakers have taken several steps to whittle away at student aid.