Student loan rates climbs due to market rates

By WEEK Producer

May 8, 2014 Updated May 8, 2014 at 10:41 PM CDT

The interest rate on federal student loans is climbing.

The rate on undergraduate government Stafford loans is going up almost a full percentage point, essentially, because the economy is improving.

Congress passed a law last summer tying student loan interest rates to the yield on 10-year treasury notes and as the economy improves, the treasury rate goes up. That pushes student loan interest rates higher.

Senator Dick Durbin is a major advocate of keeping college more affordable and says tying student loans to market rates is bad business.

"I think the government needs to help keep these interest rates under control," Durbin said. "At this moment in time, overall interest rates are low, but make no mistake at some point interest rates will go up and we'll have to cope with it."

Students at Bradley University say they already pay enough in student loans -- and can't imagine adding even more debt.

Most don't understand why students have to suffer.

"The fact that they're going up is probably not fair to us, we're getting punished for coming here and getting a higher education," said Bradley senior Jade Metzler.

"I'm really glad I'm graduating soon, because it means I would have to take out more loans and I've already taken out loans all four years -- so I have a lot to pay back as it is," said Kaitlin Pell who is graduating in December.

The current interest rate hike will go into effect July 1.

For each $10,000 in federal student loan debt, the borrower will pay about $4 more per month based on a 10-year repayment period.