Rate on popular student loan about to double

(MoneyWatch) COMMENTARY The interest rate for a popular federal student loan is about to double for millions of college students.

The prospects of this happening has prompted students to petition Congress to stop the dramatic rate hike. College students on Tuesday delivered petitions signed by 130,000 Americans to Congressional leaders.

Threatened student loan

The loan that is causing students to panic is the subsidized Stafford Loan, which low- and middle-income students depend upon. Currently the interest rate is 3.4 percent, but it is scheduled to jump to 6.8 percent when the new federal loan season begins July 1.

Students learn from their college or university if they qualify for a subsidized Stafford Loan after they complete the Free Application for Federal Student Aid (FAFSA). Besides the low interest rate, the federal government covers the interest payments on these loans until the borrowers have been out of college for six months.

In addition to the subsidized Stafford, there is a unsubsidized version that college students can qualify for regardless of their income. The interest rate on the less desirable Stafford has been at 6.8 percent for quite a few years.

Cost of Inaction

President Obama has proposed extending the 3.4 percent interest rate for the subsidized Stafford for a year, which he said would end up saving 7.4 million borrowers an average of $1,000 in interest payments.

According to calculations made by the U.S. Public Interest Research Group, which delivered the petitions, students who borrow the maximum amount of subsidized loans ($23,000), would have to pay an extra $5,000 over a 10-year repayment period if the rate jumps.

When the Democrats took over the House of Representatives in 2007, they passed legislation that gradually lowered the rates on the subsidized loans to 3.4 percent. The Republicans, however, have since gained control of the House, making gridlock more common and creating less sympathy on Capitol Hill for student loan borrowers. Congress, for instance, has already eliminated subsidized Stafford Loans for graduate students.

If you want to protect these affordable loans, now is the time to contact your representatives in Congress.

U.S. Capitol image courtesy of Flickr user Kevin Burkett.

[occupy_cbs]

Obviously, education is our country's future, and if only the wealthy can afford higher education, we will be doing our future generations a huge disservice. It was the huge tuition increases to CA state schools that prompted the peaceful demonstrations last autumn, and now it seems as if the republicans want to remove affordable loans for students.

When will the republican WAR on the middle class ever end?

[joe1022joe]

This is another one of those CBS pro-Obama propaganda pieces masquerading as journalism. "Hey kids, we gotta stop those badie Republicans before they can raise your school interest rates!" Obama promises everything to all of his sycophants - er, voters. He doesn't give two hoots if the nation sinks into a swamp of debt that we can't escape. Why doesn't just set up bars and give away booze on voting day?

[fedup12]

I understand tightening down welfare. But these are kids trying to make themselves better. AND it is a loan.... That gets paid BACK.

This pizzes me off. I have a 17 YO ready to go to school. DAMMIT.

[fedup12]

Ahhh yes. The death of the middle class.

[ProgressNow]

Higher eduction should be free of charge to anyone wanting to participate.

[Dreadnut]

Who do you want to pay for that "free of charge" stuff?

[cwong99]

The people who pay for the "free of charge" stuff are the middle aged and old people who want smart young people to take care of them when they no longer are able to. But I mean, you don't have to. But then you will complain about how stupid young people are.

[ATLCurtis]

Ignorance is the only way that republicans can maintain power, that is why they want less educated people in the US and zero forms of birth control. They are hoping that the uneducated will breed, breed, breed and eventually they will dominate the country. santorum is a prime example of this "philosophy". Our only hope is to throw them out of office again so that we can stop the ignorant terror machine.
God Bless America and God Bless Obama!
FOUR MORE YEARS!!!

[FormerUSMCSergeant]

Let 'em eat cake!

[dzaffina]

by bugwhips March 14, 2012 5:02 PM EDT
The author (partisan hack) of this article kind of forgot to add it's now the federal government that's raising the rate thanks to Obama and democrats................................................
The author (partisan hack) of this comment kind of forgot to add it's now the republican congress that's raising the rate and obama and the democrats are trying to keep it at the same rate the dems put it, in 2007 when they controlled the congress.

[dzaffina]

by perish_1 March 14, 2012 1:34 PM EDT
The democrats controlled everything for 2 years and could have enacted any guarantees on low rates and made it law.

Democrats did nothing and proves they are all corrupt and in cahoots with the banks to rob the American people.......................... lower interest rates on student loans were one of the first things the Democrats passed in the House in 2007.

[FormerUSMCSergeant]

by FormerUSMCSergeant March 14, 2012 7:08 PM EDT
He writes nonsense like that all the time....pay no attention to it.

[waterdoc123]

And Bush never lied and IS the greatest most bestist President we will ever have.

[mnguyen4]

Rep. John Kline, R-Minn., chairman of the House Education and the Workforce Committee was the one responsible for doubling of the student loan rate. He knew full well that these loans only helped the low-income and middle-class American families.

The plain truth is that the Republicans only want to help big business and the rich. You can see their policies in the last decade. From paying for the wars in Iraq and Afghanistan to subsidizing student loans, the Republicans pushed for tax cuts for the rich and for business at the expenses of help and safety net for the rest of us.

[FormerUSMCSergeant]

Well, peace benefits all while war benefits a select few.....

repubs have fought two on borrowed money in the last decade and are clamoring for another - which will be on borrowed money again, of course - and all the while screaming about the debt, mind you.

Total stupidity.