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More than 200,000 Minnesotans take out a key low-interest federal student loan each year: the subsidized Stafford loan. With Congress still gridlocked on how to avoid its interest rate from doubling as scheduled July 1, that rate jump looks likely.

(You can read and hear more on the matter 

I wanted to nail down just who's affected -- and how much more those loans are going to cost students and their families. For help, I turned to Tricia Grimes, policy analyst at the 

Here's a simple FAQ with what you need to know:

Exactly which loans will see rates double?

Only subsidized Stafford Loans taken out by undergraduates after July 1. It does 

 affect unsubsidized Stafford Loans. Nor does it affect loans for graduate students or any other federal, state or private loan programs.

Will it affect the loans students already have?

No. This is one of the most common misconceptions. It applies only to new loans -- those taken out after July 1.

The rate will rise from 3.4 percent to 6.8 percent.

How much more money will that cost students?

How much more students pay depends on how much they borrow. Grimes used a loan calculator from 

 Grimes said Minnesotans tend to borrow about $3,900 per year -- for an average total of $15,600. (That's above that national average of $13,600.)  She estimated that incoming Minnesota freshmen who follow that borrowing pattern over the typical 10-year period would pay a total of $3,119 more over the life of the loans. That breaks down to about $26 more per month in payments.

 Students across the nation would pay on average about $2,700 more on their loans of $13,600, or about $22.50 more per month.

 Minnesotans already in college might want to borrow, for example, only one more year's worth of loans. Under the same 10-year payment plan, they would pay about $750 more in total interest  -- or about $6.25 more per month.

 Finally, those who borrow the maximum amount allowed in the subsidized Stafford loan plan -- $23,000 -- would pay $4,600 more in total interest. Monthly payments would be $38 higher.

How much of a burden will the increased interest be for students?

Grimes said higher costs always make life tougher for students. But she, like other analysts, said an increase of a few thousand dollars seems unlikely to keep students from earning a degree.

Should students consider other loan options?

Grimes said the subsidized Stafford Loan is still the best bet in the student loan world. So students who feel they need to borrow money should try to get those first. Among its advantages: Unlike with other loans, interest on the subsidized Stafford doesn't accrue while students are still in school. And it carries many attractive payment options -- such as deferments -- that state and private loans do not have.

Despite the political gridlock, some lawmakers say they may be able to

 reverse the rate change through legislation next month

. It's unclear, though, how likely it is that will happen.

Education News

On Campus Blog

Alex Friedrich

Author

More than 200,000 Minnesotans take out a key low-interest federal student loan each year: the subsidized Stafford loan. With Congress still gridlocked on how to avoid its interest rate from doubling as scheduled July 1, that rate jump looks likely. (You can read and hear more on the matter here on today’s Daily Circuit segment.)…

FAQ: How the doubling of a student-loan rate will affect Minnesotans

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