Local students weigh in on student loan interest rates - ABC 33/40 - Birmingham News, Weather, Sports

Local students weigh in on student loan interest rates

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Nearly half of UAB's student body hold student loans. (abc3340.com) Nearly half of UAB's student body hold student loans. (abc3340.com)

Congress has one month to act, or the interest rate on Stafford loans doubles.

President Barack Obama surrounded himself with college students in a Rose Garden address this morning, urging Congress to act. 

Last year he conducted a similar campaign on college campuses in swing states. The solution then may be the same solution now. Congress passed a one-year extension to keep interest rates low.

Here's the surprising news. The White House and House Republicans each have a plan, not that far apart. Both plans tie the interest rates on the subsidized loans to interest on a ten-year treasury note.

The big difference:  the Republican version puts a cap on the interest at eight point five percent. The president's plan would allow a student to lock in an interest for the life of the loan. But there is no cap as to how high that interest rate could be when the loan is made. By Washington terms this should be an easy fix.

Some local students say they are nervous while they wait to see what happens. July first is not that far off. Many are afraid of the financial burden they'll carry when they graduate and have to start paying the loans back.

"You feel like you're on a losing battle, because basically my family doesn't help me pay for my schooling," said Christine Davis, a junior at the University of Alabama at Birmingham.

Davis says by the time she graduates, she will have at least forty-thousand dollars in students loans.

Interest rates on Stafford student loans are currently 3.4 percent. That rate is will double to 6.8 percent on July first, unless congress comes up with a plan to delay the increase.

"Wow. as a student that's scary because I know in about the next five years or so that's going to be affecting me," said UAB student John Trickery.

If the increase does happen, some eight-million students will feel the impact. At UAB, nearly 50 percent of the 18,000 students on campus have loans. UAB's financial aid director says she hasn't been flooded by questions and concerns from students yet.

"I think there is still a lot of hope from a lot of people that congress is going to do something to prevent it from happening and going up the same way they did last year. We were on the brink of it going up to the 6.8 percent then also," said Jan May.

Last year, the student loan debt passed one-trillion dollars. Bob Robicheaux, UAB's director of economics and marketing, says an increase in interest rates could have a far reaching consequences on the economy.

"It will affect the ability of those students to spend their money on other things. It will affect their decisions to start their families. It will affect their decisions to buy automobiles, to rent apartments, to buy homes or to buy clothes," he said.

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