Interest rates on federally subsidized Stafford student loans doubled overnight, soaring from 3.4 percent to 6.8 percent after Congress failed to reach a deal.
Though lawmakers potentially could still pass a bill to undo the damage, Congress' Joint Economic Committee has estimated the increase -- unless and until it is reversed -- will cost the average college student an additional $2,600.
Democrats have sought to keep interest on Stafford loans low, saying poor and middle class students need the help to get a college education. Republicans have proposed linking student loans to the financial markets instead of letting Congress set federal lending rates. President Obama included a variation of that market-based approach in the budget he sent to Congress earlier this year, leaving his fellow Democrats trying to block his efforts.
"Why Senate Democrats continue to attack the president's plan is a mystery to me, but I hope he's able to persuade them to join our bipartisan effort to assist students," Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, said last week
Senate Majority Leader Harry Reid said that a proposal to tie loan rates to the 10-year treasury note yield could never pass the Senate and that he couldn't back something that doesn't include stronger protections for students and parents.
"There is no deal on student loans that can pass the Senate because Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families, instead of closing tax loopholes for the wealthiest Americans and big corporations," Adam Jentleson, a spokesman for Reid, told FOX News last week. "Senate Democrats continue to work in good faith to reach a compromise but Republicans refuse to give on this critical point."
Democrats said the Senate would consider voting on a one-year extension of the current interest rates July 10, after a recess for the 4th of July holiday. But Massachusetts Senator Elizabeth Warren said that the party preferred to include a comprehensive student loan measure in a long-range law governing colleges and universities.
"We need a one-year patch to keep interest rates from doubling on student loans," Warren told the Associated Press last week. "That buys us the time."
The Associated Press contributed to this report.