student loan rates double

Borrowing costs for lower-income students shot up on Monday, jumping from 3.4% to 6.8% on subsidized Stafford loans from the federal government. For the average borrower, that means an additional $761 for every loan they take out through the program, according to Mark Kantrowitz, a financial aid expert and publisher of Edvisors Network.

Neither party is thrilled about the outcome. But in contrast to last year’s student loan fight, when both presidential candidates took to the bully pulpit on the issue, there seems to be little sense of urgency coming from Congress or the White House, despite the absence of any clear resolution.

Here’s why: First, the rate hikes only affect new loans that are taken out, not existing ones. Most students don’t start taking out loans until August or September for the coming school year, and only about 26% of all federal student loans are taken out through the subsidized Stafford program, which requires proof of financial need. What’s more, Congress could pass a retroactive fix to lower the rates for the loans that are taken out at the 6.8% rate, according to Senate Democratic aides.

So while the optics of doubled rates aren’t great, Congress still has some time to come up with a solution before they actually hit students’ pocketbooks. And that took the political pressure off legislators who failed to come to a deal last week and simply packed their bags for the July 4 recess.