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Interest rates will jump from 3.4% to 6.8%.

Student loans are the second largest source of consumer debt in the United States

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After weeks of warnings and stalled debate in Congress on a long-term solution, the interest rate for new, federally subsidized student loans doubled July 1. Students taking out new loans for the fall semester will see their interest rate jump to 6.8% from 3.4%.

Interest rates for subsidized loans have been this high before. The rate was 6.8 percent as recently as the 2006-7 academic year, before Congress passed legislation that fixed the rate for unsubsidized loans at that level and gradually decreased the subsidized loan interest rate over five years, before allowing it to rebound in 2012. (That scheduled increase, which was delayed last year, is the root of the current interest rate controversy.)

Parents take out second mortgages to pay for college, and students look for lower-cost ways to complete their educations. Yet the federal government just doubled the interest rate for the most vulnerable students and families.While credit cards are often portrayed as the source of many consumers´ debt problems, student loans are actually the second-largest source of consumer debt in the United States after home mortgages.

 

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