By Jennifer Liberto, CNNMoney
Washington (CNNMoney) - Students preparing to take subsidized government loans will see their interest rates double to 6.8% from current levels, starting Monday, July 1.
But hope isn't lost yet. Lawmakers are working hard behind the scenes trying to strike a deal to save the 7 million college students who are slated to take the subsidized federal Stafford loans this year.
Senate Democratic leaders are throwing their weight behind a bill that would extend the 3.4% rates for another year, just as Congress did last year.
House Republicans have said they'd prefer a longer term solution, like the one they passed back in April to keep rates low for now but rise along with market rates in the future.
Students are being told to prepare for the worst and hope for the best.
"We're advising our schools to tell students that their subsidized Stafford interest rates are going to be 6.8% on July 1," said Justin Draeger, president of the National Association of Student Financial Aid Administrators.
My own experiences and thoughts on student loans – from someone STILL paying their student loans http://wp.me/p3zyOp-u
On one hand, this doesn't change much. You can fully deduct student loan interest from your taxes, so, at least for me, I would pay the exact same amount for my subsidized loans if the interest doubled. I make less than $30K and I still pay a good amount of federal taxes, so I could probably deduct another 3 or 4 times more interest than I do with my current subsidized loans.
It's just taking money out of one pocket (income taxes) and putting it in another (subsidized loan funding). Still the same tax payers are footing the bill.
However, some people get screwed. The people with student loans that are either unemployed, or do not earn enough to pay enough federal tax to write off the interest. But of course neither party cares about that demographic.