PHOENIX - It doesn't matter if students are going to Arizona State University, the University of Arizona, Northern Arizona University or any other college or university across the country, there's a very good chance their college costs will be increasing this summer. That's because the interest rates on student loans are going up.
"It makes it even scarier," said ASU graduate student Guadalupe Vela. "I'm not sure I'm going to be able to afford the interest on my unsubsidized loan."
Vela is like millions of other students and isn't happy about having to pay the higher interest rates. She's getting masters in social work. The interest rate on her graduate school loans, which will total about $24,000, is jumping from 5.31 percent to six percent. For undergraduates, the rate's increasing from 3.76 percent to 4.45 percent.
This is all fallout from the Federal Reserve's decision to hike interest rates in March.
"It's a pretty significant jump in interest rates when it comes to student loans," said Jim Dew, a financial advisor with Dew Wealth Management.
He said when you combine the higher interest rates with rising tuition rates, it creates a financial mess for millions of young adults.
Last year, the average college graduate with loans had $34,000 in debt. With the new interest rate, that would mean adding another $1,300 to the debt, if the loan is paid back in 10 years or thousands more if it takes longer.
This has a ripple effect on the economy. More millennials are living with their parents longer and not buying homes until later in life because they can't afford it.
"Higher interest rates means it's going to be harder for those people, not only because their payments are going to be higher, but because mortgages they're going to get approved for are going to have higher payments as well," Dew said.
"To be honest, it's scary," Vela said. "Because I don't know if I'm going to be able to afford it once I get out of school, especially being a social work student."
But Vela is like many other students and wouldn't be able to go to college without the loans -- even if that means paying a higher interest rate.