WASHINGTON — Students only borrow money for one year at a time. Loans taken before Monday are not affected by the rate hike.
Both political parties tried to blame the other for the hike and student groups complained the increase in interest rates would add to student loan debt that already surpasses credit card debt in this country.
"The federal loan program is burying them in debt. With the doubling of the interest rate, Congress is pushing student borrowers to their limit," said Michael Russo, federal program director with consumer advocate U.S. PIRG.
Lawmakers knew for a full year the July 1 deadline was coming but were unable to strike a deal to dodge that increase. During last year's presidential race, both parties pledged to extend the 3.4 percent interest rates for another year to avoid angering young voters.
But the looming hike lacked sufficient urgency this year and Congress last week left town for the holiday without an agreement. Instead, the Democratic-led Senate pledged to revisit the issue as soon as July 10 and retroactively restore the rates for another year — into 2014, when a third of Senate seats and all House seats are up for election.
Even when lawmakers return, there's no guarantee there will be the votes to restore the lower rates.
"When we pass a deadline and there are not immediate effects, the sense of urgency that accompanies a deadline evaporates and that is what I'm afraid will happen here," Hartle said.
For months, the student loan issue was the subject of partisan sniping — sometimes within the same party.
Obama's budget proposal included a measure that would have linked student loan interest rates with the financial markets. Fellow Democrats called that unacceptable because there were no guarantees interest rates would not skyrocket if the economy improves.