Total student loan debt has been trending higher for some time, but the cost of existing debt could increase even more if Congress fails to take action.
According to US News, the interest rate on subsidized student loan debt is scheduled to double on July 1, jumping from its present level of 3.4 percent to 6.8 percent. The change will take effect unless Congress passes stopgap legislation to prevent the increase. Approximately 7.4 million Americans would feel the financial pinch if this legislation fails to pass.
Support for the bill appears to be strong among both established political parties. What seems to be holding up passage is the decision over how to recoup the cost of the measure. The $6 billion cost has to come somewhere, either from increases in tax revenues or from reductions in spending on other programs. Deciding how to cover the cost has been a point of disagreement between Republicans and Democrats, but most all members of Congress agree that maintaining current student loan interest rates is a top priority.
Total student loan debt has reached record levels this year as more Americans return to school. At the same time, the rate of student loan delinquencies has also reached record levels, according to the New York Fed. The delinquency rate on education debt has now reached about 8.69 percent and supporters of the subsidized interest rate extention worry that higher interest rates will only cause the delinquency rate to increase.
Less than two weeks remain for Congress to agree on funding and pass this important measure. If they fail to do so, millions of student loan debt holders can expect an increase in their monthly payments.