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Increased Interest Rates Kick In On Student Loans
CEDAR RAPIDS, Iowa (CBS 2/FOX 28) -- More than 220,000 Iowans borrow Stafford loans. The original intent of the subsidized loan was to make it possible for people to get an education who otherwise couldn't afford one.
One year's tuition at Mount Mercy University runs about $26,000 before grants and scholarships.
Junior Cassie Paulson is taking on debt to cover the expense.
"Definitely, a lot of it," she said.
Cassie is using federal loans to help pay for her education.
Now, any subsidized loans she or others take out after July 1 will see double the interest rate, from 3.4 to 6.8 percent.
"But I do only have one year left. I kind of feel bad for people who are starting," Cassie said.
But financial planner Tory Meiborg said families are starting to question if a four-year education is even feasible. Meiborg is president of World Trend Financial Planning Services.
"If your goal is to have your child go to four years of school, you may want to consider saving in advance to help subsidize the cost of the child, so it's not all loans when they graduate," Tory said.
The Center for American Progress said 72 percent of Iowa college graduates are in debt, in average, about $22,000.
Tory said 30 percent of those loans default because graduates have a tough time making payments. He said the increased interest rates affect everyone.
"And those are a lot of times your largest consumers. As they establish, they buy houses. They furnish those houses. If they're burdened by an unhealthy debt load, they just can't do those things," Meiborg said.
Still, Cassie said in this age, you need the degree.
"In the end, it's still going to be worth it. It's just scary to add more money," Cassie said.
The increase took place because Congress never came to an agreement to keep the low interest rates in place. If they find a compromise, it's possible the rates could be lowered.