Student loan rate hike: What you need to know
Congress has until July 1 to extend current low rates on subsidized student loans for more than 7 million undergraduates.
April 24th, 2012
04:39 PM ET

Student loan rate hike: What you need to know

By Jennifer Liberto @CNNMoney

WASHINGTON (CNNMoney) - On July 1, the interest rates on student loans subsidized by Uncle Sam will double to 6.8%.

The upshot? Students taking out loans for the next school year will have to dig deeper in their pockets to pay them off. Unless Congress steps in to stop the increase from going forward.

The issue has become a political talking point. President Obama, who called for congressional action in his State of the Union speech in January, is using the issue to stump for votes.

His Republican rival Mitt Romney says he, too, believes Congress should step in.

What's at stake: More than 7 million undergraduates have subsidized student loans, which means the federal government absorbs some of the interest rate for lower- and middle-income families based on financial need.

If Congress does nothing, the cost to students borrowing the maximum $23,000 in subsidized loans is an extra $5,000 over a 10-year repayment period. The cost to the federal government to extend the lower interest rate is $5.8 billion, according to an analysis by the nonpartisan Congressional Budget Office.

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