TERRE HAUTE, Ind. (WTHI) - If you're a college student and planning to take out a loan to cover tuition, prepare to pay more.
Congress could not agree on how to extend a break in interest rates for subsidized Stafford loans which passes the buck on to the student.
Congress allowed another aspect of President Obama's stimulus package to expire. This will impact college students and student loans.
The interest rate on any new subsidized Stafford loan has doubled from 3.4 percent to 6.8 percent.
"Those are for new loans that are coming on board for students that are starting in the fall semester, basically, after today, July 1," said Crystal Baker, the student financial aid director at Indiana State University.
Baker clarified that loans current and past students have already taken out will not be affected. Nor does this change unsubsidized Stafford loans, which already carried a 6.8 percent interest rate.
"Typically for most students, it's a jump of between $5 to $10 a month," Baker said.
That's why ISU Economist, Robert Guell, doesn't see this change making huge impacts on the economy.
"It's going to cost you $2000 over 240 months," said Guell. "Your payment's going to be $10-$15 a month bigger that it otherwise would have been. I'm not thinking this is a big, lead weight around the economy."
When you combine that with the fact that most college graduates earn about one-million more than non-graduates, Baker hopes prospective students still see a college degree as a good investment.
"Taking out that loan even at a higher interest rate than what it was as of yesterday is still absolutely a worthwhile investment," Baker concluded.
Some members of congress have pledged to come up with a deal to lower the interest rate of subsidized Stafford loans when they return from the July 4th holiday.
If that happens, the lower rate would apply to loans taken out for fall.
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