PARKVILLE, Mo. -- Interest rates on federally subsidized student loans doubled overnight as Congress failed to pass a bill that would have held down costs for college students. Rates jumped from 3.4 percent to 6.8 percent. The increase is expected to cost the average college student an additional $2,600.
At Park University, students say it's going to be harder to pay for their education. Democrats want to keep interest rates on so-called Stafford loans low. But Republicans would rather link the student loan rate to financial markets as a way of keeping Congress out of it. Democrats may vote on a one year extension of the low 3.4 percent rate on July 10. But for now, schools are telling students to plan on paying the higher 6.8 percent interest rate.
At Park University, this school alone has a portfolio of more than $40-million in government student loans.
Business major Royce Skocny is a veteran who's using the GI bill to pay for most of his college education. Still, he expects to graduate with about $15,000 in federally subsidized student loans.
"Invest in 20 years from now not 20 days from now," Skocny said. "I know that they think, raise the interest rates, it's going to be a short term fix. But all it's going to do is make us a less educated society overall. And that's the opposite direction we need to think about heading."
One-third of all undergraduate students are like Skocny, they rely on subsidized loans, which are awarded based on economic need. Taxpayers absorb a portion of the interest rate.
Outstanding student debt has become a national issue in recent years. Student loan debt is second only to mortgages as the largest debt consumers carry. In 2011, students on average owed nearly $27,000 in loans.