News 12 This Morning / Thursday, April 12, 2012
AUGUSTA, Ga. -- Cracking open the books and studying is a full-time job for Aleshia Williams.
It's one of the reasons she decided to take out a loans to help pay for school at Augusta State University.
Her federal loan has an interest rate of 3.4 percent, but as summer rolls around, that rate is set to go up. In fact, it'll jump twice as high to 6.8 percent.
"That's a little extreme, a little too much," Williams said.
Instead of paying nearly $900 in interest for a basic $5,000 loan, students will pay back nearly $2,000 in interest in addition to paying back the $5,000.
Edith Marshall, the student loan administrator at Augusta State explained, "Many of our students are in a situation where they have to choose between going to college and not going to school."
Marhsall told us students looking to enroll in the fall need to be aware of the differences between a federal and private loans. Private lenders may offer more competitive rates.
"But their interest rates are variable and federal loans have a fixed rate for the life of a loan," Marshall explained.
Students can also defer payments for up to three years on federal loans if they find themselves without a job after graduation.
"We are already having trouble paying for school; that's why we're getting the loan in the first place," Williams said.
Marshall said loans should be used as a last resort and to use any grants first.
Williams and her classmates have other alternatives.
"Some are thinking about quitting school for a while so they can save money to pay for tuition and come back to school," she said.
As rates get set to increase, the Obama administration is looking at providing more relief to struggling students through through things like loan forgiveness after 20 years under certain circumstances
Lawmakers have to decide by June 30 whether to continue the College Cost Reduction and Access Act of 2007, which would keep interest rates at 3.4 percent. It was passed back in 2007 to gives students a break because of the lagging economy.