The interest rate on subsidized Stafford loans taken out by undergraduates this year could jump from 3.4 percent to 6.8 percent on July 1 if Congress fails to act. President Obama has already called on legislators to prevent the potential rate doubling, and members of the House voted to keep the current rate. Senate Republicans, however, stopped a bill that would have kept the 3.4-percent rate for new borrowers.
Ultimately, the question comes down to how Congress will pay for the $6 billion cost of keep rates low, according to a U.S. News report.
The average $3,357 Stafford loan would cost its borrower about $114 in capitalized interest at the new rate, approximately double what the same student would pay now, Mark Kantrowitz, a financial aid expert, told U.S. News.