Some Arkansas students have been “kind of freaking out” since interest rates on one type of college loan doubled July 1, according to Amy Neathery, student services coordinator for the Arkansas Student Loan Authority.
The interest rate on subsidized Stafford loans, which account for about one-fourth of all federal student loans, doubled from 3.4 percent to 6.8 percent July 1 after a temporary freeze expired and Congress was unable to agree on extending the freeze or replacing it with a new agreement.
The House and Senate have pledged to revisit the issue.
“We’ve even had borrowers call and say, ‘OK, is this going to affect us?’” Neathery said. “It’s only affecting new borrowers. Students that already have student loans, it will not affect them. And we don’t think that it will even affect the new borrowers; we think Congress will get this worked out.”
The interest rate has been above 6 percent before. Congress passed a law in 2007 to reduce the rate gradually from 6.8 percent to 3.4 percent over four years, but the law expired in 2012. The rate became an issue during last year’s presidential race, eventually leading to a deal to freeze the rate at 3.4 percent for one year.
Democrats and Republicans have blamed each other for letting the rate jump.
In Arkansas, out of $700 million in federal student loans awarded for the 2011-12 academic year, $315 million was awarded in subsidized Stafford loans, which are for moderate-to-low-income students.