Interest rates for Stafford loans increased from 3.4 percent to 6.8 percent Monday because lawmakers failed to strike a deal to restore lower rates last week. Congress' Joint Economic Committee estimated the cost for students to be about $2,600
These federally backed loans are offered to eligible students enrolled in accredited American institutions.
"In the grand scheme of all the loans that I already have, I suppose it's not out of control," said Angie Platt, a 20-year-old University of Iowa student. It's just another thing to add on. It doesn't help me; that's for sure." Platt, a native of Lakeville, Minn., expects to graduate with at least $60,000 in debt.
The Republican-led House co-opted the president's proposal and passed a bill in May that linked hike in interest rates to the financial markets with a cap. The Democratic-led Senate, however, was unable to complete a two-year-extension of the proposed interest rate hikes.
Democratic senators and the White House hope to bring down the rates in the Congress before the start of the next school year when they meet after the July 4 holiday. The Democratic-led Senate hopes to restore the rates in 2014, when a third of Senate seats and all House seats are up for election.
"We are confident they will get there and that the solution will include retroactive protection for students who borrow after July 1 so that their student loan rates don't double," Matt Lehrich said, a spokesperson for the White House.
If they fail to reach an agreement, college students applying for new loans for the fall term will face higher interest rates this year.
"It's kind of surprising; that's a big jump," said Rebecca Ehlers, an Iowa State University senior majoring in math. Ehlers' overall financial package includes Stafford loan of $1,000.
"I may work more or ask my parents for money rather than going through all that," said Ehlers, 21.
Those students who have been granted subsidized Stafford loans before Monday will not be affected by the rate hike.
Terry Hartle, a top official at the American Council on Education said that it is rare to find college students taking loans in July and early August. It is also not possible to seek loans 10 days before the term starts.
Normally, the students take loans for one academic year at a time.
Justin Draeger, president of the National Association of Student Financial Aid Administrators, said that the interest rate hikes will not deter students from attending classes in the fall. The immediate effect of the hike will be felt once student's graduate and have to start repaying the loan amount.
