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Many affected if interest rate doubles

May 16, 2012 Philip Burgess

Student loan debt may be considered one of the worst financial troubles to sweep the United States since the recession. That problem, which plagues millions of Americans every year, could become worse in the near future should Congress fail to act and allow interest rates to double this summer. Debt collection agents would most likely see a spike in business as people would default quicker. The Center for American Progress reported Subsidized Stafford Loans, a federal student loan that has been taken out by more than 7 million American students, could see an interest rate spike in July if Congress does nothing about the situation. The current interest rate is 3.4 percent, and may double on July 1, 2012. For the most part, people who take out Stafford Loans are people who face tough financial times and meet stringent need-based requirements, according to New York's Pall Times. If a loan is taken out by a poorer former student, there is more of a chance that they will default. Furthermore, the job market has not entirely recovered, so if this rate accelerates sharply, many could find themselves facing an awful financial reality. The Center for American Progress said if the interest rate does double, American families can expect to pay $1,000 more per year in school debt bills. The amount all depends on the total payment a person owes. National Association of Student Financial Aid Administrators Spokeswoman Haley Chitty told First Coast News interests rates will go up by an average of $9 per year. Florida-based First Coast News reported many Americans that have attended college may be affected. Jacksonville University's Breanne Simkin told the source 90 percent of undergraduates and 50 percent of graduate students have taken out a loan. According to the Center for American Progress, a large volume of people with the loans may become overwhelmed with heavy payments, capitalized by the fact that tuition is on the rise by approximately 8.3 percent annually and average wages are on the decline. Terre Haute's WTHI-10 reported member of the House of Representatives voted in favor of a bill that would freeze the interest rate at 3.4 percent for Stafford Loans. It is up  to the Senate, now, to vote on the bill. If it passes into legislation, the higher rates would not be a problem for those with student loan balances.