Interest rates on a subset of federal student loans officially doubled today from 3.4 to 6.8 percent. The rates apply only to newly issued Subsidized Stafford loans, affecting about 7.4 million students next year. But the increase in interest rates could have been prevented – and many members of Congress tried.
The scheduled increase has been circled on many stakeholders’ and policymakers’ calendars since Congress granted a one-year reprieve last summer. Unlike last year, though, Congress debated a host of reform proposals, many of them market-based (tied to the rate on the 10-year Treasury note), rather than just a simple one-year extension. The latest plan, a bipartisan proposal from Sens. Joe Manchin (D-WV), Angus King (I-ME), Tom Coburn (R-OK), Richard Burr (R-NC), and Lamar Alexander (R-TN), was immediately rejected by Senate Majority Leader Harry Reid (D-NV).
Though the House and Senate haven’t yet managed to agree on a plan, it is still possible that Congress could vote to retroactively reset the rates before students start school in the fall. Working with Slate, we developed a calculator that explores several of the proposals on the table: the bipartisan Senate plan, a similar proposal from President Obama, a temporary extension of the 3.4 percent rate, and the now-effective 6.8 percent rate. Enter your loan amount for next year, and see what your interest rates and monthly payments could be under each of the plans: