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The Real Deal: Student Loan Interest Rates May Double
ALBANY – The interest rates on federal students loans could soon double. If the warning sounds like a deja-vu, it is. Last year, Congress voted on a one-year reprieve on raising interest rates but that extension is about to expire and now incoming freshman could end up paying $5,000 more than current students are paying for the same loans.
The rates would rise from 3.4% to 6.8% on July 1st. The hike will impact students taking out new subsidized loans backed by the Federal government. Last year, the increase was avoided but now the election is over, mandatory budget cuts are taking place and student-advocate groups are fully prepared for the hike to go through.
The potential increase is coming at a time when more students are defaulting on their loans than ever before. Nearly 7 million graduates are in default nationwide and those who haven’t even graduated yet are worried they too won’t be able to keep up. “Now is when I'm really realizing, oh my god, I have all these loans out, I'm going to be paying this off for who knows how many years,” says Cynthia Crudale, a senior at St. Rose College. Her friend, Michele Flores who is also a student at St. Rose worries about where the money will come from to pay her loans, “ Every day I try to put aside some to save for that, it's a constant worry in the back of my head, when I graduate I have loans for years to pay off and that's a constant worry… I should have done a better job understanding just what a huge commitment it was,” she tells CBS6.
According to national statistics, two-thirds of graduating students owe more than $25,000 in loans, one-in-ten owe more than $55,000. If interest rates go up, those numbers are likely to go up too.