Over the past month, you may have heard about the impending subsidized student loan interest rate increase, as politicians frantically work to come to a consensus before July 1. Right now, subsidized student loans interest rates currently stand at 3.4%, but will increase to 6.8% unless a new bill is passed by July 1.
With this decision having a major impact on your future, it is important to stay up to date with the issue and the suggested solutions.
1. Default Solution: Increase to 6.8%
As stated above, if politicians fail to come to an agreement, the interest rate for subsidized loans will increase to 6.8%.
2. Democratic Solution: Student Loan Affordability Act
Most Democrats in the House of Representatives argued for a two-year extension on the 3.4% interest rate, which would maintain the current interest rate and bring the question to Congress again in two years. However, this bill was rejected in the Senate on earlier this month.
3. Senator Elizabeth Warren’s Solution: Student Loan Fairness Act
Senator Warren proposed a bill which would dramatically cut the interest rate on subsidized loans. Citing the fact that the student loan debt now exceeds $1 trillion, Warren proposed cutting the interest rate to 0.75%, which is the same rate that banks are able to get from the government. For more information, please see our recent article on the details of Warren’s bill.