Student Loan Rates Doubling?

Published on June 27, 2013

Student loans subsidized by the government may have their rates double to 6.8% come July 2013.  The current rate for subsidized loans from the government is 3.4% and this doubling may make college unobtainable for millions of Americans.

A recent article from the White House states that without congressional action, rates will double on July 1, 2013.  Last year rates were set to double, however young people took to social media sites and implored their elected representatives “don’t double my rate.”

The article states that, “President Obama put forward a long-term solution that cuts rates this year on nearly all new loans, ensures that all students have access to affordable repayment options, and does not charge students higher interest rate to pay for deficit reduction.” If this solution goes through, then college, while still being expensive, will remain a possibility for millions of Americans who would otherwise not be able to afford to go.  This possible increase in loan rates will not only affect people looking to go to college but for their entire family.  With less than a week until July 1, millions of Americans are waiting to see if any action will be taken so that rates do not double.

A great way to deal with education costs is a Coverdell Education Savings Account (ESA).  A Coverdell ESA is an account created as an incentive to help parents and students save for education expenses. These accounts grow tax free but are not deductable.  With a Coverdell ESA the money put in is able to be used for not only tuition but also required books, supplies and equipment, and qualified expenses for room and board.  As long as the money in the account is used for qualified educational expenses it is withdrawn tax free. Not only can this be used for higher education but also for qualified primary and secondary education expense. You can read more about Coverdell ESAs on our website.