Rising student loan balances and concerns about young adults’ ability to fit those bills within their budgets have been of particular concern in recent months, and now experts worry that those problems may be exacerbated further this summer.
On July 1, the interest rate on student loans issued by the federal government will double unless Congress takes action, as noted in a story in the Louisiana State University student newspaper the Daily Reveille. Currently, the interest rate on these loans is just 3.4 percent, but will balloon to 6.8 percent unless Congress extends the College Cost Reduction and Access Act, which was passed in 2007. Since that year, the law has reduced the rate on federal student loans to the current low.
However, some experts note that the 3.4 percent rate is considered surprisingly low and only recently dropped to its current level.
“Even if [the law] doesn’t get extended, 6.8 [percent] is still a pretty low interest rate,” Emily Hester, coordinator in the Office of the Vice Chancellor of Student Life and Enrollment at LSU, told the newspaper.
However, most student loan bills take about 10 years to repay on average, and over that time, young adults may begin taking on other types of debt that may make it more difficult to pay all their bills. In addition, a study conducted a few years ago found that about one-third of LSU students worried about their education loans while they were still in college.
Student loan debt has grown significantly in the last several years and recent estimates show that the national total of these bills, which typically cannot be cleared in a bankruptcy filing, now stands at more than $1 trillion, making up a significant portion of total consumer debt.