The increase is for federally subsidized Stafford loans that go to students from low-income families.
"The change is on new loans that students will begin taking out for this coming year and will go into repayment sometime in the future," Craig Fennell of Temple University Student Financial Services said.
Many students like Dominique Fowler are terrified by what it means down the road when they're out of school.
"We already graduate with debt over our head without being able to find a job," Fowler said.
"I'm financially unstable at this time; college is rough to pay for me. I definitely will struggle much more to pay for it now," Temple student Evan Reed said.
Economist fear this hike in interest rates could lead to a rush of student loan defaults that would rival the recent home mortgage crisis.
"If you take an average $27,000 or so that a student is borrowing, graduating with at this point in time, that's a nationwide average, probably another $2,600 or $2,500 over the life of the loan," Fennell said.
"It's a lot of money. What can I do? I got to finish my education. I'm a continuing education so I have to finish," student Kim Gregory said.
It's up to Congress to change these interest rates back to 3.4%. Millions of American college students are depending on the U.S. Congress to help them out.
Congress is on an extended break for the July 4th holiday.