The interest rate on new subsidized Stafford loans, federal loans given to undergraduate students based on financial need, doubled Monday from 3.4 percent to 6.8 percent.
The Congress Joint Economic Committee estimates the new rate will cost the average student an extra $2,600, according to Fox News.
The new rates will affect all loans with a first disbursal after June 30, 2013, which means all loans taken out by students before will not be affected by the new interest rate, according to an article on http://www.consumerist.com.
The increase will affect more than 105,000 Maryland students, according to a press release from Maryland Sen. Barbara Mikulski's office.
Sen. Jack Reed, D-Rhode Island, introduced a bill, S:1238L Keep Student Loans Affordable Act of 2013, on June 27 to retroactively renew the interest rate at 3.4 percent for the 2013-2014 school year. The bill is also authored by Sen. Kay Hagan, D-N.C., and co-sponsored by 37 senators, including Maryland senators Ben Cardin and Mikulski. The bill is expected to be discussed July 10, when Congress returns to session.
"College is a part of the American dream - it shouldn't be a part of the American financial nightmare," Mikulski said in the release.
The increase will affect at least 60 percent of McDaniel College students, Cheryl Knauer, Director of Media Relations said in an email.
The bill would renew for one year the interest rate of 3.4 percent the Higher Education Act of 1965, according to the Bill.
According to a press release from Reed's office, the bill would be retroactive to July 1.
"We need to keep student loans affordable, but we must not sell out our students and make them mortgage their future to afford college," Reed said in a prepared release from his office.
The bill's purpose is "To amend the Higher Education Act of 1965 to extend the current reduced interest rate for undergraduate Federal Direct Stafford Loans for 1 year, to modify required distribution issues for pension plans, and for other purposes," according to the bill.
The bill is one of the five plans that rose to address the interest rate increase, according to "PBS News Hour."
The bill was introduced to give a short-term fix and to give Congress time to create a long-term solution, according to a press release from Reed's office.
The bill is fully paid for by closing a loophole that allowed owners of certain 401(k)s and IRAs to avoid taxes on the accounts, the release states.
Cardin said it is important to keep interest rates on student loans low.
"We must stop this increase in student loan interest rates from taking effect while we work out a long-term solution to protect our students and our nation's future," Cardin said in a press release.