If you aren’t already in the know, here’s the skinny: the interest rate on federally subsidized Stafford Loans for undergraduate students is set to double on July 1st, 2012–from 3.4% to 6.8%. The White House estimates that the average student affected by this change will rack up an extra $1000 in debt over the life of their subsidized loans.
Will it affect you?
Maybe, but only if you’re an undergraduate student who will be taking out a new subsidized Stafford loan after July 1. And only if Congress fails to pass an extension of the current low rates.
Are they going to pass an extension?
Again, maybe. Both Republicans and Democrats want the low rate extended. The question, as always, is how to pay for the estimated $6 billion cost of a one year extension.
What’s the holdup?
Originally the Democrats wanted to pay for it by closing some tax loopholes for the wealthy. Their specific idea: tax profits for shareholders in “S corporations”–small companies set up by a few people to escape certain employment taxes–but only if those shareholders have adjusted incomes over $200,000 and work for an S corporation that has fewer than three shareholders. In essence they wanted to fairly tax a wealthy few that were trying to avoid it.
Republicans countered by saying, of course, that would “stifle” the economic recovery. They pitched the idea of paying for the rate extension by eliminating a public health fund in President Obama’s new health care law. So instead of taxing the wealthy, they wanted to cut health benefits for the poor.
How’d that work out?
Obama threatened to veto any rate extension if it was paid for with money from the health care law, at which point the Republicans blamed him for refusing to solve the issue for some kind of political gain, as if he were more worried about the election than the students themselves.
Where are we now?
Stalemated, of course. Congress still has until July 1 to joust over the issue, which means we’re just going to sit here and cross our fingers that it all gets worked out.