Why the student loan interest rate hike isn't that big a deal

FORTUNE -- For all the gripes over the costs of student loans, there may be fewer reasons to worry about this week's doubling of interest rates on subsidized Stafford loans than you might think.

On Monday, rates surged to 6.8% after Congress couldn't agree how to keep them from rising. Despite the bad news that the hike could cost average student borrowers an additional $2,600 over 10 years (or an extra $21 a month), it doesn't really affect anyone -- at least not yet. The hike applies to loans issued after July 1, 2013. Students typically sign their loan documents when they return to campus in the fall.

That doesn't leave Congress much time, though -- if lawmakers can't get their act together this summer student borrowers will certainly pay more than previous graduates.

Congress has pledged to tackle the issue after the July 4th holiday. There are a handful of competing proposals being considered -- most of which urge the government to allow interest rates to fluctuate with the market rather than leaving them fixed and set by a highly politicized Congress. This makes economic sense, since market rates would reflect what it costs the government to lend to students.

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The options include President Obama's and Republicans' push to peg it to the 10-year U.S. Treasury note and U.S. Sen. Elizabeth Warren's (D-MA) proposal to link it to the rate that banks pay to borrow overnight from the Federal Reserve (currently near zero percent). As different as the proposals might look, the costs to students differ very little, at least over the next four years, says Beth Akers, an education policy fellow at Brookings Institution, a Washington DC-based think tank. She thinks the hype over interest rates is overplayed.

Akers developed a calculator that shows how much the six options on the table would cost an average borrower each month. This includes the most costly option: If the rate stays at 6.8%, the average borrower with $27,000 in federal student loan debt (the maximum allowable for both subsidized and unsubsidized loans) would pay $327.47 a month. That's high, but it's only a $46.93 difference from the most generous proposal under Obama's plan, which would peg rates to the 10-year note plus 0.93 percentage points.

A lot of things could change over the next few years, but Akers' conclusions are worth looking at; they factor in the likelihood that yields on Treasuries will continue rising over the next few years.

What's perhaps most unexpected is that it makes little difference even if Congress passes Warren's bold proposal, which is highly unlikely. The Massachusetts senator wants to match interest rates charged on student loans to the super-low rate of 0.75% that the Federal Reserve offers banks for overnight loans. This would only last for a year, though. After that, rates would rise to 6.8%. So borrowers would pay $313.90 a month, only slightly less than the $327 a month if rates stayed at 6.8%.

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In fairness, Warren's proposal might make sense for anyone who thinks that struggling student borrowers entering a rough job market should enjoy the same cheap rates as banks. Pragmatically, though, it's right to label it gimmicky at best, since it makes little financial sense. The discount rate offered to banks reflects the risks involved; such loans span nowhere near the average 10-year life of a student loan.

Even if it makes more sense to match interest rates for student loans to the 10-year note, the cost differences are minimal under Warren's proposal. Which is why interest rates aren't as big a deal as the media and lawmakers would have us think.

What matters, Akers adds, is not what kind of savings student borrowers gets from interest rates. Democrats may want rates to return to 3.4%, but most students are unlikely to notice that kind of savings. However, they'll probably notice if their Pell grant gets bigger.

Correction: An earlier version misstated the monthly costs of a student loan if interest rates remain at 6.8%. It's $327 a month, not $427 a month, according to estimates by Brookings Institution.