Greensboro, NC -- While President Barack Obama was in Chapel Hill telling college students about his plan to limit their debt after graduation, people in the Piedmont were thinking over the implications of a potential student loan interest rate increase.
Come July 1, the interest rates on some federal student loans could jump from 3.4 percent to 6.8 percent, unless Congress steps in and extends the interest rate relief. The consequences of the increase are clear for people who have loans, but a financial planner in Winston-Salem says everyone could feel an impact regardless of what lawmakers choose to do.
"It's very important for the US, for the strength of our economy, that we have an educated workforce," financial planner Michael Wittenberg said. "If the cost of being educated is too high, it limits the number of people who participate in that education and makes us less competitive as a society."
Wittenberg says people who have high student loan debts are likely to put off getting married, having kids and buying a house, which also slows the economy.
Southeast High School teacher and fulltime Ph.D. student Dana Lyles understands the tough choices people with student loansface. She has at least $30,000 in student debt and is watching the debate closely. The average student carries about $25,000 in loandebt and would pay an additional $1,000 over the life of their loan if the interest rate doubles.
Lyles broke down that increase to what she might face each month.
"That $50 to $100, that could be gas in my tank for a month," she said. "That could be a book for me furthering my education or my tuition money that I'm paying out of pocket. ... That could make a difference on what bills I pay from month to month, especially on a teacher's salary."
The White House estimates 160,000 folks in North Carolina could be affected by the potential increase. So with such clear implications, why not maintain the lower rate? Because it would cost about $6 billion, the government says, and lawmakers would have to find that money somewhere. A spending cut or another tax could impact everyone.
Wittenberg says the best way for parents and grandparents to prepare for college costs is by taking advantage of a 529 plan. The Securities and Exchange Commission says "a 529 plan is a tax-advantaged saving plan designed to encourage saving for future college costs," and most are sponsored by sponsored by state governments. Clickhere to learn more about them and how you can start saving now.
As far as the debate over extending the low interest rate is concerned,both President Obama and presumptive Republican presidential nominee Mitt Romney say they favor maintaining the lower rate.