Student Loan Rate Set to Rise, Despite Lack of Support

By Tamar Lewin. The interest rate on many student loans is scheduled to double on July 1, to 6.8 percent from 3.4 percent — just as it was last year, when in the midst of an election campaign, Congress voted to extend the lower rate. Again this year, no one wants the increase to happen, especially since even the current rate is well above market. But once again, there is likely to be a good deal of brinkmanship before the issue is settled. This time around, though, longer-term solutions may be on the horizon.
On Tuesday, the day before the White House plans to send its budget to Congress, student advocacy groups are releasing an issue brief charging that the federal government should not be profiting from student loans, while more and more students bear a crushing debt burden. The brief, citing a February report from the Congressional Budget Office, said the federal government makes 36 cents in profit on every student-loan dollar it puts out, and estimates that over all, student loans will bring in $34 billion next year. Read more...