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Student Loan Rates Set To Double on July 1st

July 1st was the deadline for Congress to take action against the rate hike on new subsidized Stafford student loans.  However Congress left Friday June 26th with no agreement reached.

A very short history: A fixed rate of 6.8% on federal student loans was set in 2002.  Early in 2007, Congress passed a bill to cut interest rates in half.  However the loans that qualified for this rate reduction only included the subsidized Stafford loans available to middle and lower income households, and only those that were for undergraduate degrees.  This rate decrease was set to expire in 2012.

In 2012, reaching no real agreement and seeking time for a more permanent solution, Congress pushed the deadline back for 1 year.

That year has come and gone with no decision from Congress.  On July 10th, the Senate will vote on a proposal, once again extending the due date for a long term solution for 1 year, and retroactively extending the 3.4% rate to loans made after the 1st.  A spokesman for the White House spoke with confidence, saying that they believe the Senate will take action and find a solution in the next few weeks.

There are several proposals and acts that have been written by both sides, to create a fair solution that will take the burden off of students and also work to reduce the budget deficit.  It remains to be seen which of these holds the most weight.

The crushing mass of student loan debt has surpassed 1 trillion dollars, and is second only to housing debt.  Analysts have predicted that people under 30 are waiting longer to buy houses, or cars, and are less likely to start new businesses or take risks because of the huge weight of their student loans.  With the younger generation too preoccupied with debt to invest in their futures, it is hoped that Congress will agree on a long term solution to prevent adverse affects on the economy by this trend.

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