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Student loan rates just doubled -- what now?

July 1, 2013 at 6:17 PM ET

Graduating students arrive for Commencement Exercises at Boston College in Boston, Massachusetts May 20, 2013.
BRIAN SNYDER / Reuters
Graduating students arrive for Commencement Exercises at Boston College in Boston, Massachusetts May 20, 2013.

Interest rates on some federal student loans – namely the Stafford loan for undergraduate students – doubled Monday to 6.8 percent.

College students won’t get hammered just yet, however – that happens after they graduate and interest begins to accumulate.

Here are points to consider about the student loan rate increase as borrowers contemplate whether to take out these loans:

What federal student loans are impacted by the doubling of interest rates?

Not all federal student loans are impacted. Only rates on new, subsidized federal Stafford loans doubled to 6.8 percent from 3.4 percent on Monday. Students who took out Stafford loans when the rate was 3.4 percent don’t need to worry if they locked it in – those will not increase.

Rates on existing unsubsidized Stafford loans will remain at 6.8 percent. Rates on federal PLUS loans (taken out by graduate students and parents of dependent undergrads) will remain at 7.9 percent.

(Read More: Student Debt Stalemate Will Hammer Undergrads)

Will this double my monthly loan payments?

Video: Radford University misspelled "Virginia" on its 2013 diplomas, reports CNBC's Brian Sullivan; and Sharon Epperson reports interest rates on federal student loans will jump from 3.4 percent to 6.8 percent if Congress does not act.

The doubling of the interest rate may sound dramatic, but it does not double the loan payments. Most of the loan payment goes to pay down the principal balance of the loan. On a 10-year repayment term, the monthly payment will increase by about one-sixth, says Mark Kantrowitz, publisher of Edvisors.com, a network of college financial planning and scholarship websites.

For example, if a student takes out $11,000 in Stafford loans at 6.8 percent, that student would pay $126.59 a month for 10 years to pay off those loans.

In contrast, student who had taken out the same amount at 3.4 percent would pay $108.26 a month for 10 years. That may not seem like a big difference but it adds up: $2,200 more over that decade.

(Read More: Senator Gives an 'F' to Student Loan Rate Jump)

What does this doubling in student loan rates mean for the average borrower?

About two-fifths of undergraduate students graduate with subsidized Stafford loan debt. The average amount of subsidized Stafford loan debt at graduation is about $9,000 (or $11,000 for those who receive a Bachelor's degree).

Kantrowitz is also the founder of Finaid.org, which has a handy loan repayment calculator.

Do I have to make these increased payments immediately?

The rate increase affects students after they leave school as no interest is charged on subsidized loans until after a student graduates. (Graduates have a six month grace period before they have to start repaying their loans.)

Could rates come down if Congress decides to act later this summer?

Certainly Congress could make a change to lower interest rates and make it retroactive to July 1. But a retroactive change would only apply to those loans that have not yet been disbursed by the U.S. Department of Education.

(Read More: Introducing the Finance Whizzes of Tomorrow)

Last year Congress passed two laws to implement a one-year extension to the 3.4 percent interest rate. The first law authorized the Education Department to delay disbursements on subsidized Stafford loans to July 6, 2012. The second law, enacted on July 6, implemented the extension to the 3.4 percent interest rate. But policymakers are still far apart on key issues, such as whether there should be a cap on the interest rates. A retroactive change in rates may be unlikely.

—By CNBC's Sharon Epperson. Follow her on Twitter @sharon_epperson

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