Student Loan Interest Rates To Increase This Fall - ABC FOX MONTANA NEWS, WEATHER, SPORTS - KTMF/KWYB

Student Loan Interest Rates To Increase This Fall

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MISSOULA -

Going to college in the fall will cost students a lot more money, after the U.S. Senate fails to move forward with a plan to stop interests rates on subsidized loans from doubling.

Economists said the higher interests rates are a sign of a economic growth, that comes with a price for students.

University of Montana graduate Cody Stekly knows the burden of having to pay off student loans.

"I have accumulated quite a bit of federally subsidized student loans," Stekly said.

He's now taking extra classes to take his degree to the next level, and Stekly along with 6,700 other University of Montana students are soon about to feel the pinch of heftier loans.

"It's definitely a hassle," Stekly said. "I'd love to see that money go to other places, other than student loans."

As of July 1, interest rates for students taking out new federally subsidized loans doubled to 6.8%. On Wednesday, the Senate did not pass a measure that would have restored interest rates to 3.4%.

"It puts a ding in my spending money as far as month to month goes," Stekly said.

Patrick Barkey of UM's Bureau of Business and Economic Research said the total liability of student loans is about a trillion dollars, three times bigger than in 2004.

"It's already affecting the economy, not so much the interests rate, as the magnitude of student loans," Barkey said.

Barkey said while it might be tough on students, the higher interests rates mean more people are borrowing money, so they can get an education, which means good news for the economy.

"Education is one of primary investments you can make for yourself and it's good for the whole economy," Barkey said. "It means students can get higher skilled jobs and grow more wages."

Capitol hill insiders estimate the average student's post-college debt will be $2,600 more if nothing changes.

"I think doubling it is a big mistake and hopefully that doesn't deter people away from going to school, because it's a good option right now with our economy," Stekly said.

Some senators are still working on a plan that would keep student loans at the lower rate. It's not clear when or if this compromise will see the Senate floor.

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