Student loan interest D-Day: What's it mean?
Come July 1, the interest rate on new subsidized Stafford loans could double from 3.4 percent to 6.8 percent. Usually when someone says, "interest rates will double," people start looking for the exit.
But Betsy Mayotte with the nonprofit group American Student Assistance says it’s not as bad as it sounds.
“The financial impact on a day-to-day impact is very minimal,” she says. Mayotte runs the numbers for a $10,000 loan at the higher rate. “Their monthly payment amount would change by about $6.50,” says Mayotte.
Over ten years, though Mayotte says that would be an extra $2,000. Add that to the $18,000-$22,000 in debt many graduates already lug around.
Rohit Chopra with the Consumer Financial Protection Bureau says the bigger the bill the less there is for everything else.
“That’s several hundred dollars a month that they cannot use to save for a housing down payment. They cannot use toward starting a small business, or whatever their dream might be,” he says.
Extending the current interest rates of 3.4 percent -- even for just one year -- would cost the federal government $6 billion.
Debt. Don't let it ruin your life. Even if you feel like you're swimming in student loans, we've got some advice on what to do. Check out our guide here.