06.14.13 | 5 Solutions to the Subsidized Student Loan Debate
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.
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With the recent legislation involving the subsidized student loan interest rate, many have begun to express concern towards the fact that if Congress is not able to reach an agreement by July 1,
As you may recall, last year, Congress voted on whether to raise the subsidized Stafford loan interest rate to 6.8%, or keep it at 3.4%. Congress decided to prolong the decision for another year and keep the subsidized interest rate at 3.4%. However, a year has gone by, and it is once again time for Congress to vote. If Congress fails to come to a consensus by July 1, the interest rate on subsidized loans will automatically double to 6.8%.
Families everywhere are currently sweating over
You may have heard of Stafford loans, PLUS loans, and private student loans, but do you really know the differences between them? Is one type of loan really better than the other? Let’s find out.