By Kayla Walker

College students nationwide will face greater amounts of debt due to a federal budget measure that will increase interest rates on student loans by an estimated 30 percent this summer.

As of July 1, 2006 students will pay 30 percent more in interest rates than they are currently paying on Federal Stafford loans. Students who are currently making payments will pay 6.89 percent, whereas students who fall in the 6-month grace period after graduation will only pay 6.11 percent, up from 4.7 percent.

However, students weren’t the only group hit by the budget cuts. Parents of college students will also face higher interest rates on Parent Loans for Undergraduate Students (PLUS loans). Interest rates on PLUS loans will also increase by 30 percent, from 6.1 percent to 7.9 percent.

“These rates are tentative; nothing is set in stone yet,” Brooke Rickard, financial aid advisor from the Advisors Network of the Stafford Loan, said. Both loans have a cap as well. Interest rates cannot be set higher than 8.25 percent on Stafford loans and 9 percent on PLUS loans.”

The new legislation is also expected to generate $14 billion over five years from lenders. Before, lenders were allowed to keep profits that are generated when rates they pay to the government are less than what borrowers pay them.

With the new legislation, lenders will have to pay that difference to the government, but will be compensated by the government if what the lenders pay is more than what their borrowers paid.

The increased interest rates and the expected future surplus paid by lenders will produce almost one-third of overall saving in the Federal Deficit Reduction Act of 2005.

“I think it’s ridiculous that [the interest rates] are increasing because tuition increases every year,” said Nicole Rosado, junior psychology and sociology major, who relies on student loans as part of funding her education. “Congress should be providing more financial aid so it’s easier to get a good education.”

Stephen Phifer, a junior music major who has taken out student loans to fund his education at the University was also discouraged.

“We’re told that education is important, but when we try to get one we end up putting ourselves in a position to get taken advantage of,” Phifer said.

Although federal interest rates on student loans are increasing, they are still at or below market rates and having federal student loans allows for breaks in your taxes.

“So a 6 percent [student] loan for someone in a 33 percent tax bracket is really only paying 4 percent net [because of tax rebates],” explained Andrew Spieler, assistant professor of finance.

“It really makes me feel that my future is so uncertain,” Dani Swasey, junior theatre arts major, said. “Not only will I be paying regular life expenses, but now I’ll have to pay more on my loans.”