Depending on the type of loan, some students won't feel the pinch of doubling interest rates while others will take the hit upon graduation.
WASHINGTON – Strapped with a student loan and worried about the doubling of interest rates? You may not have to worry depending on your loan.
CNBC reports that interest rates will double from 3.4 percent to 6.8 percent on new, subsidized, federal Stafford loans. Interest rates on existing Stafford and Federal PLUS loans will remain the same.
While millions of students will take out loans this year, they won’t feel the pinch at least until they graduate. Interest isn’t charged on a loan while a student is enrolled in college.
So how badly will the increase hurt?
According to Edvisors.com, the extra interest will increase a monthly payment about one-sixth on loans with a 10-year repayment term.
CNBC also reports that the average amount of subsidized Stafford loan debt at graduation is about $11,000 for those receiving a Bachelor’s degree. Based on that amount of loan debt, the founder of Finaid.org, calculates the borrower’s loan payment will increase by $24 a month on average for a 10-year repayment term for a Bachelor’s degree recipient.