(Host) Millions of people have taken advantage of today’s low interest rates by refinancing their mortgages. But many borrowers struggling to pay off large student loans are locked into high interest rates that they can’t refinance.
VPR’s Nina Keck has more:
(Keck) Craig Chevrier went to college in the late 1980s. When he graduated, the New England job market was bleak.
(Chevrier) “So I went back to graduate school and continued to accrue [debt] as I put myself through graduate school.”
(Keck) Chevrier, who lives in Hinesburg, graduated with a Master’s degree and $45,000 worth of student loan bills. To make things easier, he consolidated his student loans in 1998 at an interest rate of 8.75% – a fair price at the time. Now, however, some consolidation rates have dropped to less than 3%, and Chevrier and millions of others like him, would like to refinance.
(Chevrier) “I think my frustration really results in that I see a market where large mortgages and other loans are refinanced at lower and lower rates all over the place, yet I am unable to refinance my already consolidated student loans and lower my payments and make my student loans more manageable.”
(Alexa Marerro) “It would be nice if it were just an issue of a borrower and a lender working out a deal, but since the federal government is involved and there’s a cost associated with it, it’s not as easy to just say you can consolidate as many times as you want.”
(Keck) Alexa Marerro works on Capitol Hill for the Congressional Education Committee. She says the government began subsidizing and guaranteeing student loans almost 40 years ago under the Higher Education Act of 1965. Lawmakers added the consolidation program in 1982 as a way to make it easier for borrowers to simplify and extend repayment. Because of the complexity and cost to the government, the law states that borrowers can only consolidate their loans once.
The Higher Education Act of 1965 is up for reauthorization this year and at least three bills have been introduced in the House of Representatives to address the refinancing issue. Scott Giles works for the Vermont Student Assistance Corporation. He says that while lawmakers may be sympathetic to those paying high interest rates, it’s unclear how much they can help considering the current budget situation.
(Giles) “Congress is going to have to make the choice whether they want to invest additional resources into programs for students who are at risk for not attending school, or whether they want to focus their resources on folks who have already participated in the program and are currently in repayment.”
(Keck) According to the U.S. Department of Education, $67 billion worth of student loans will be made available in 2003. The amount the government will pay to support just this year’s loans will be about $6 billion. If borrowers who already consolidated their loans were allowed to refinance, the overall price tag for all student loans would climb substantially. But Vermont Congressman Bernard Sanders says money is not the issue.
(Sanders) “The question is national priorities and whether you pay attention to the educational needs of working families or whether you give tax breaks to billionaires.”
(Keck) Sanders is cosponsoring one of the bills that would allow people to refinance their consolidated student loans. He’s also pushing the government to increase spending on Pell Grants to make college more affordable. He says getting lawmakers to raise Pell Grants may be difficult, but he says there is bipartisan support on the refinancing issue and he’s optimistic it’ll be addressed.
(Sanders) “The high cost of education and the burden that many people have in paying off their student loans is something that members of the Senate understand as well as members of the House. I think if we work hard on this issue and if people all over this country say that it is absurd to pay higher interest rates than they should be paying, we can win that struggle.”
(Keck) The House of Representatives is expected to take up on the Higher Education Act this Fall. The Senate is expected to act on it up in the Spring. Some borrowers don’t want to wait, however, and are using homeowner loans and even credit cards to pay off their student loan bills.
While that may cut their interest rates, counselors at the Vermont Student Assistance Corporation say federal student loans do have certain benefits and deferment options that commercial loans do not. And they say for some, those benefits may outweigh added interest.
For Vermont Public Radio, I’m Nina Keck in Rutland.