Students Prepare for Interest Rates on Subsidized Loans to Double on July 1

American students prepare for a massive hike in subsidized loans costs as the interest rate is set to hit 6.8%. Government loans are not always the cheapest option for students, says loan comparison site

May 30, 2013, 08:30 ET from

CLEVELAND, May 30, 2013 /PRNewswire/ --

Students are bracing themselves for a substantial rise in interest rates that will see their college federal loans costing twice as much in interest. CNN Money reports that Congress and the White House are at loggerheads over what approach can be taken before July 1 to avert this steep increase.

Although the House (under Republican control) passed a bill last week to prevent the doubling of interest rates now in order to raise them at a later date, President Obama used his veto to block the bill. Motivation for the President's decision is thought to come from wanting to help a higher number students "lock in" a lower interest rate sooner, before they skyrocket in the future.

The rise will freshly affect an estimated 7 million students that have completed paperwork for subsided loans for the 2013 - 2014 school year. These individuals will almost certainly borrow at a far greater rate than they anticipated or budgeted. It is thought unlikely Congress and the White House will succeed in breaking their stalemate over the issue, meaning that the rate will sunset back to the 2007 rate of 6.8%.

With the costs of subsidized government borrowing increasing exponentially, there exist other options for students. Particularly for those with bad credit, it may pay off to search for specialist bad credit loans. Sites such as feature a number of adverse credit specialist lenders, some of whom cater their credit products to students.

Sam Ash, spokesperson for the site, released the following statement.

"Student debt is a major issue at the moment. In 2011, students owed on average almost $27,000 in loans. Graduates from the class of 2013 now average a massive $35,200 in debt. This figure is set to grow, as interest rates will continue to climb. As an alternative to subsidized federal loans, it is possible to find low rates through our comparison service. The rates that will be applied by lenders on our platform will be set for the term of the loan so that there will be no nasty surprises in the form of interest rate increases."

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Sam Ash