01/26/2012 01:50 pm ET Updated Mar 27, 2012

Student Loan Interest Rates to Double This July

There's a countdown to an ominous deadline for college students across America. When time runs out on July 1, 2012, student loan interest rates will double for almost 8 million students.

Without a plan, millions of students will pay a crushing $5,000 more on their student loan than they otherwise would.

Higher education in America continues to be critical for both individual success and the social and economic health of our country. While college attendance has grown over the past two decades, state appropriations have slumped as family finances have struggled to keep pace with the slow economy. As a result, more students than ever must rely on student loans to pay for a four-year degree and start their post-collegiate lives with significant debt.

Heavy student loan debt carries negative consequences for borrowers, who must make monthly payments with their hard-earned dollars rather than save up and get ahead. High debt can affect where graduates live, the kind of careers they pursue, when they start a family or purchase a home, and whether they can save for retirement. The combination of high student debt and low earnings can lead to default, ruined credit and wage garnishment. Borrowers in unemployment or those encountering other financial distress are most at risk. Such distress runs counter to the goal of higher education.

Over the previous decade, the number of students taking out loans to pay for college grew from one-third to two-thirds and the amount of student loan debt those graduates held surpassed $25,000. As states cut funding and federal student aid stagnates, students and families who need to cover college costs turn to loans.

In the past five years, federal leaders have made unprecedented investments in student aid to help students afford colleges. The College Cost Reduction and Access Act passed in 2007 was one of these investments. Beyond the creation of the Public Service Loan Forgiveness program as well as the Income Based Repayment program, the new law gradually cut interest rates on subsidized Stafford loans, which account for almost half of all federal student loans. Subsidized Stafford loans are awarded to borrowers based on need, and are 'subsidized' because the federal government pays the interest on the loan while the student is enrolled. The interest rate on this loan was cut from a 6.8 percent fixed interest in 2007 to 3.4 percent fixed interest through the 2011-2012 academic year.

Unfortunately, unless Congress acts, the interest rate cut is set to expire on July 1, 2012 which would effectively DOUBLE the interest rate on subsidized Stafford loans back to a fixed 6.8 percent interest rate.

This rate hike could not come at a worse time. It will make subsidized Stafford loans much more expensive, at a time when college costs are soaring. This year, 43 states have reduced funding for public colleges on top of record tuition increases last year. Decreasing state funding has driven tuition up sometimes by double-digit percentages in some states.

Now, beyond borrowing more to make up the difference, subsidized Stafford student loan borrowers will also have to pay more in interest on their loan. Almost half of all undergraduate subsidized Stafford loan borrowers take the maximum $23,000 allowable. For those students, next year borrowing new loans the double interest rate will cost them about $5,000 more in interest with a 10-year repayment period and about $11,000 more in interest with a 20-year repayment period. Facing higher loan payments, these borrowers will find it even harder to hit the ground running after graduation.

Without a new plan, millions of students will pay a crushing $5,000 more on their student loan than they otherwise would.

That is why President Obama used his State of the Union to propose keeping these interest rates low.

We agree. Students are already weighed down by state budget cuts, struggling family finances and uncertain job prospects We applaud President Obama for his proposal to keep student loan interest rates low. Now it's Congress' turn.