As the average amount of debt for young adults increases once more this year, students may face further financial strains when interest rates for student loans double this summer.
 
Come July 1, the student loan interest rate will increase from 3.4 percent to 6.8 percent.
 
The current, lower interest rate is the result of the College Cost Reduction and Access Act, passed by Congress in 2007. Under the act, interest rates declined each year until reaching 3.4 percent this year.
 
The Act expires this year and has not been renewed.
 
The 3.4 percent rate has only been in effect for one year.
 
While the change is significant, it’s unlikely the higher interest rate will heavily impact students since the lower rate hasn’t been effective for long, according to Emily Hester, coordinator in the Office of the Vice Chancellor of Student Life and Enrollment.
 
“Even if it doesn’t get extended, 6.8 [percent] is still a pretty low interest rate,” Hester said.
 
She said the 3.4 percent interest rate was considered to be shockingly low when it was announced. But when the rate reaches its typical 6.8 percent, it will result in an increase of about $2,800 for the average borrower.
 
Hester said an extra $2,800 probably wouldn’t be significant enough to deter students from pursuing higher education.
 
“I don’t think it’s going to change people’s borrowing,” she said.
History sophomore Samuel Joyner said he’s borrowed around $3,000 or $4,000 in student loans.
 
Though he said he’s unsure about the details of his loans, he will begin paying them off six months after he graduates. He said he didn’t know about the upcoming increase in loan interest rates.
 
“I was kind of hoping the computers would crash by the time I have to pay back my loans,” Joyner joked.
 
A recent study from PNC Financial Services Group found young adults in their 20s have average debt levels of $45,000, and many see higher numbers as the years go by and they make no substantial payments.
 
Most student loans take about 10 years to repay, Hester said.
 
Those 10 years typically see significant growth in the amount students owe. The average amount of debt can increase by $66,000 as borrowers age from 20 to 29 years old, the PNC study found, and 60 percent of people in their 20s said they stress over outstanding debt.
 
Despite the high numbers, the average debt expressed in the study is actually low for the age group, Hester said.
 
Hester said a University survey from three years ago that showed roughly one-third of the student population stressed about loan debt. She said a similar survey will be conducted in the near future, but she thinks University students may not have reached the same level of debt as adults who have already graduated.
 
Students faced with debt early on need to start with budgeting their money, Hester said. She said figuring out when and how debt can be chipped away is important for avoiding the problems people in their 20s face across the country.
 
Another problem that adds to debt comes from students’ desire to live the same way they did before college, she said, stressing that debt means living on a budget and making sacrifices.
 
“It’s your duty and responsibility to be aware of how much your loan is and how to pay,” Hester said.
 
She said it’s also important to consider saving money early.
 
PNC said 94 percent of people in their 20s said they already save money, but most of that money is for big purchases or the future.
 
Hester said saving is part of planning for life after college. It’s important for students to plan for the future because thinking about money on a day-to-day basis isn’t enough, she said.
 
 
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