- (Photo: Reuters)
The House of Representatives will vote Friday on whether or not it will extend the College Cost Reduction and Access Act which was passed in 2007, and fixes loan rates at 3.4 percent.
If Congress fails to extend the 2007 act, student borrowers could face interest rates that are double the current rates being offered. It is important to note, however, that not all student borrowers will be affected by the change.
If the act is not extended, outstanding loans will not be affected. Student who will be affected by the vote are those who are applying for new loans and considering taking out a federal Subsidized Stafford loan- other federal loans will not be affected.
Subsidized Stafford loans are typically made available to those students whose families fall into a lower income bracket. Students attempting to attend a more expensive university which places a large gap between their parent's income and the cost of tuition may also qualify.
According to President Obama, the increased interest rate on the loans would equate to the total of an additional $1,000 a year and could affect over 7 million students. Jason Delisle of the New American foundation, which focuses on next wave policy issues, said during an NPR interview that the amount is actually quite small when considered on a month to month basis. He suggested that the extension of the act was a "poorly targeted subsidy" because it translates to only $9 a month.
Delisle also suggested that the conversations surrounding the renewal of the act were "irresponsible" because the extension would only last for one year and would cost the government $6 billion.
As part of his campaign however, Obama has recently been trying to reach out to America's youth. His stance on student loans could drastically affect the impression that he makes on those concerned with student debt.