HOUGHTON - Barring legislative action, interest rates on some federal student loans will be higher this fall.
A proposed compromise that would keep the interest rates on subsidized Stafford loans at 3.4 percent stalled in the U.S. Senate Thursday. The rates doubled to 6.8 percent on July 1, although it could still be lowered retroactively.
The increase will raise the cost of interest for the average borrower of subsidized Stafford loans by $2,600 over the life of the loan, and $4,500 for those who borrow the maximum, according to the U.S. Congress Joint Economic Committee.
The rate increase only affects new loans taken out July 1 or later by undergraduates.
At Michigan Technological University, 4,074 students qualify for the Stafford loans, said Kyle Rubin, associate director of financial aid. The number of students who are borrowing the loans was unavailable Friday.
The 6.8 percent rate is a return to where Stafford loans were set in July 2006. Starting two years later, they declined gradually to the 3.4 percent level, where it had been since mid-2011.
"It's actually going back to the original rate," Rubin said.
Despite the higher interest rate on Stafford loans, many students might still prefer them, he said.
"The fact certainly remains that the Stafford loans are a federally backed loan, and they're in the student's name," he said. "There's a benefit to that, whereas if they go with an alternate lender, there's a good chance the alternate lender wouldn't put it in the student's name without a co-signer ... it's still a decent option for students when considering how to finance an education."
Rubin said students can look for additional scholarships that will help defray the cost of education. Students can also control costs through making well-informed decisions on their schools, he said; a Michigan Tech education is valuable to students in terms of high job placement rates and starting salaries.
"While students may have to take loans, they have a good opportunity to pay those loans back with their employment after graduation," he said.
One of those affected by the rate increase is Tech student Cora Hemmila, a third-year geological engineering major from Cromwell, Minn.
"It's already expensive to pay for college," she said. "That definitely doesn't help. You don't feel it now, but it's not something I'm looking forward to paying back."
However, she'll probably stick with Stafford loans over looking for a private loan.
"They're still typically better," she said.