Just as student-loan debt has reached a record $1 trillion, need-based student loan interest rates will double to 6.8 percent July 1 if Congress doesn't act.
Millions of students nationwide and thousands in the Chattanooga area who borrow for college would face thousands of dollars in additional interest.
Dalton State College student Hilary Hicks already has two outstanding student loans and expects to borrow more before she graduates in about 18 months.
She tries not to worry about the loans, telling herself she's going to find a job upon graduation and everything is going to be fine.
"I don't have a choice at this point," she said.
And that's the problem, said Dianne Cox, director of financial aid at the University of Tennessee at Chattanooga.
The higher interest rates will be an extra burden for many students who already are struggling with fewer scholarships and grants, Cox said.
"State and federal programs have not kept up with the [increasing cost] of higher education, and more and more students are having to turn to loans to get them through," she said.
Nationally, more than 60 percent of college students get a federal loan.
In 2007, Congress passed the College Cost Reduction and Access Act, which, among other things, gradually reduced the interest rate for subsidized student loans. This year the rate was 3.4 percent.
But the law is set to expire June 30, which means Congress must come up with an estimated $6 billion a year if it wants to prevent rates from doubling on new loans.
WHAT IT MEANS
Extra cost to be paid by families if interest rates double:
State -Borrowers increased interest in 2012-13-Payments for year
Source: Democrats on the House Education and the Workforce Committee report
SUBSIDIZED STAFFORD LOANS
• Provide low-interest loans to needy students, with interest paid by the government while borrowers are in school.
• About 8.9 million borrowers in 2009-10 received average loans of $3,556 for undergraduate students and $7,171 for graduate students.
Source: National Association of Student Financial Aid Administrators, UTC
"There's very strong bipartisan support for keeping rates low," said Jonathan Fansmith, associate director for government relations at the American Council on Education. The Washington, D.C.-based association conducts research and public policy advocacy related to higher education.
"There's no shortage of attention, but nobody has proposed a way to pay for this," he added.
And given the economic climate, the money must come from a source that doesn't alienate one political side or the other, he said.
The higher rate will affect an estimated 7 million students who will pay more than $11,000 each in additional interest over 20 years, according to Democrats on the House Education and the Workforce Committee.
Need-based loans are based on family income and offer a significant savings, since interest only begins to accrue when the student graduates.
Unsubsidized loans already have a set rate of 6.8 percent, and the interest begins to accrue while the student is in school.
A higher rate will affect about 4,000 undergraduates at UTC and close to 1,300 students at Cleveland State, officials said.
"I just feel like [these changes] are compounding the issues that borrowers already are having to struggle with high loan balances," Cox said.
Average loan indebtedness at UTC for fall 2011 was $21,812 for undergraduates and $39,149 for graduate students, she said.
"We are trying our best on campus here to educate students about the cost of taking out loans and trying to get them to really think about it before they take out a loan," she said.
But the need for loans increases with tuition costs.
The number of students applying for financial aid, which includes grants, work study and loans, increased from 12.9 million in 2006-07 to nearly 19.5 million in 2010-11, according to the National Association of Student Financial Aid Administrators.
Meanwhile, the average cost of attending a four-year public school increased by 90 percent, from $8,032 in 2001 to $17,131 in 2011, according to congressional Democrats.
In that time, tuition increased by 75 percent at Dalton State College and more than 100 percent at Chattanooga State Community College.
"Many students are simply unable to attend college without the support of a student loan," said Jeanne Hinchee, director of financial aid at Chattanooga State.
This year, 5,084 Chattanooga State students received need-based loans averaging $2,791, for a total of $14.2 million.
At neighboring Dalton State College, student financial aid director Carol Jones said 2,208 subsidized loans worth $5.8 million, and 1,424 unsubsidized loans totaling $3.4 million, were awarded in the 2010-11 school year.
Hicks, who hopes to graduate from Dalton State with an associate's degree in communications and a bachelor's in marketing systems, has borrowed to pretty much cover her whole tuition and fees. Her few scholarships didn't begin to cover the $1,700 semester cost for tuition and books.
So far she has a $6,000 unsubsidized loan and a $3,500 subsidized loan. She took out another loan for summer courses and anticipates needing even more before she graduates.
"I hope all my years of experience working at the school and the internships I expect to do will put me ahead of the rest so I can get out there and get a job, but it's scary not to really know and have a guaranteed job as soon as I get out," she said.
A change, already in place, ends subsidized loans for graduate students starting in the new semester. About 650 UTC students will be affected by that change, Cox said.
Andrew Clark is finishing his first semester as a graduate student in public administration, but he already is saddled with loans from his undergraduate degree.
"[These changes] are making grad school more expensive in the long term," said the 22-year-old from Manchester, Tenn.
"I know students who have to reduce their course load or work on campus," he added.
Tuition is close to $4,000 for in-state graduate students taking nine hours.
But he still thinks a college degree is worth it.
He hopes to build a career in higher education, and so for him, getting a graduate degree was never an option, he said.
"You can make it work somehow," he said.