Student interest rate rose today for student taking out a new federal loan. The rate hike seems minimal, but this could be the first of many to come. This is because during a bipartisan deal passed by Congress and signed into law by Obama ties the rates to the financial markets.
Tying the financial markets could raise the rates higher sooner than later. This would be a huge burden on students who can't afford college tuition. According to data from the Labor Department, the price index for college tuition grew by nearly 80 percent between August 2003 and August 2013. Plus, if the economy improves, then rates will increase.
According to the Institute for College Access and Success, more than 70 percent of graduates will carry student debt into the real world. This policy will just about guarantee an increase this percentage rate.
Once the rates increase, the rate break down goes along these rules. Rates will increase from 3.86 to 4.66 percent on undergraduate Stafford loans. Graduate student loans go from 5.41 percent to 6.21 percent. Interest rates on Plus loans for parents go from 6.41 percent to 7.21 percent.
The rate increase will only apply to students taking out new loans. For future graduates, this could lead to student repaying their loan with multiple interest rates.
This compromise was reached in Congress when the rates doubled last year. The deal was done in a haste with the students taking the hit on this deal. Although the deal capped interest rates at 8.25 percent for undergraduates, graduate students 9.5 percent, and parents' rates at 10.5 percent Congress could still raise rates.
This is another example of Congress hurting the people then helping. Future jobs revolve around highly skilled workers, so why is Congress making it harder for students to afford college? Higher cost for college will diminish our chances to compete globally in the future.