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Students: Hunker Down for Interest Rate Hikes


Congress has been threatening to allow interest rates on federal student loans to double for a while now, but this time it looks like it’s actually going to happen. Unless Congress takes action now, hikes will take effect on July 1 for all future borrowers. Two groups of senators have unveiled two different plans to avert the increases, but neither seems likely to pass before the deadline. WSJ:

With the Senate’s attention largely focused on the effort to complete a major immigration bill before Congress leaves Friday for a weeklong recess, the prospects of a quick deal on the student-loan issue are bleak, the lawmakers said. […]

“Everyone’s focused on immigration right now,” Mr. Harkin told reporters. “They haven’t turned their thoughts to this. We talked about it in caucus a couple times, but people are focused on the immigration bill.”

Congress is allowing a bill whose chances of success in the House are already dicey to gum up the works so throughly that other important measures are falling by the wayside. Senators are claiming they can deal with the issue retroactively, but given their track record, we wouldn’t bet on any kind of speedy resolution.

But even as a stopped clock is right twice a day, sometimes no action is the best action. In this case, these increases aren’t as bad as they seem. Cheap and easy government loans have been a key player in fueling skyrocketing tuition. Dramatic interest rate hikes on college loans will undoubtedly be painful for many students, but if they create more pressure on colleges to lower prices, it could turn out for the best in the long run.

[Ball and chain image courtesy of Shutterstock]

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