This morning President Obama unveils his ideas for a federal budget. It’s expected to include a proposal for higher taxes on the wealthy and an end to corporate tax loopholes. It’s also expected to include a plan to change the way student loan interest rates are set. Right now, rates are set to double from 3.4 percent to 6.8 percent in July.
“It’s important to point out that the interest rate that’s going to double is not on outstanding loans,” says Jason Delisle, director of the federal education budget project at the New America Foundation.
“The interest rate that’s going to double is on a subset of loans for undergraduate students, for the upcoming academic year,” Delisle says.
Those loans, called Stafford loans, are capped at $5,500 a year. Delisle says even if the interest rate doubles it would only mean paying about $9 extra a month.
“Over the course of repayment, it’s a lot,” says Ethan Senack, who works with U.S. PIRG, a non-profit research organization. U.S. PIRG recently released a report saying the government stands to make billions off of student loans.
“By the end of a student’s college career when they enter into repayment, they’ll see a cost increase of about $4,000 to $5,000,” says Senack, who adds that the government shouldn’t be in the business of profiting off of higher education.