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Fox News reported today “Student loan rates double after Congress fails on fix“. This is big news and somehow the title of the report was unclear.

The fact is that the interest rates on the federally subsidized Stafford student loans will be 6.8% instead of 3.4% now. These government student loans are often rewarded to low-income students. Our government used to pay the interest that accrues on subsidized loans while students are in school and for six months after graduation.

After Congress failed to reach an agreement, Stafford student loans reverted to the nonsubsidized rate. Unless students make interest payments while in school, the Stafford student loans will accrue interest at a fixed rate of 6.8 percent. This will be a big impact to the 7 million students that have these loans.

Why did Congress fail to reach an agreement? The problem is that our government has to borrow money in order to subsidize. In addition to the Stafford student loans, government has continued to subsidize the home mortgage market for the last few years. More than 90% of all residential home loans are owned by the US government. To continue subsidizing will mean more debts for all Americans. This is a difficult situation.

The NY Times did a good job to summarize tips to minimize debts. Read on

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