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Student Loan Costs to Increase by $20 Billion Despite Interest Rate 'Deal'

Students will soon be hit with a 'double whammy' in cost hikes

- Common Dreams staff

While the US Congress is expected to approve a deal by Friday over how to prevent a spike in interest rates on federal student loans, College students should still expect to face a roughly $20 billion increase in the cost of those loans, reports the Washington Post.

Starting Sunday, students earning graduate degrees will be responsible for paying the interest on their federal loans while they are still attending school and immediately after they graduate. Additionally, the government will no longer cover the interest on undergraduate loans during the six months 'grace period' after students finish school.

These changes were swept under the rug as congress fought over the singular issue of maintaining a lower interest rate.

After this year's deal, students who take out loans over the next year will receive a lower interest rate but that interest will be charged as soon as they graduate. But students applying the following year will be hit with a "double whammy" including an even higher interest rate.

"It really makes the loans kind of unpredictable and hard to understand for students and families when these changes are happening through the budget process," said Megan McClean, managing director of policy and federal relations for the National Association of Student Financial Aid Administrators.

House Speaker John Boehner says deal imminent on student loans, Wednesday, June 27, 2012 (AP Photo/J. Scott Applewhite)