Are you a New Jersey resident with mounting student loans from private lenders? Are you wondering how you are ever going to pay them back? Well, relief may be on the way from Ohio senator Sherrod Brown (as reported by the Huffington Post today), who is proposing a bill that would grant the secretary of the treasury the authority to create a government-backed financing vehicle that could enable you to refinance your private loans into new ones with significantly lower interest rates!
How Much of a Better Rate?
The $1 trillion of student loan debt nationally has been in the news quite a bit in the past few weeks, especially with the interest rate on subsidized federal Stafford loans doubling as of July 1. Thus all federal, undergraduate loans will be at the rate of 6.8% (with graduate loans at 7.9%). But private lenders are charging on average 8-10%!
According to BankRate.com, the 30-year fixed rate mortgage is at 4.48%. In comparison, student loan rates are horrendous!
How Would the Plan Work?
Senator Brown's bill calls on the treasury secretary to determine first whether borrowers “are unable to secure adequate credit accommodations with existing private education loans.” If that determination is made, then the secretary would have the authority to create a scheme to help borrowers.
The bill suggests that policymakers consider using the Federal Reserve, Federal Home Loan Banks, and Federal Financing Bank as sources of credit to refinance borrowers.
Will This Be Enough?
But with even federal rates more than 2 points above current mortgage lending rates, and graduate school loans not much lower than the private rates, will that be enough to solve the crisis?
Wouldn't it be better if you could refinance your private loans to government backed ones at competitive interest rates? We will have to see, but this is a good move in the right direction.
If you live in New Jersey and are struggling with payment of your student loan debt, I may be able to be of assistance. Just give me a call at 856-432-4113 to schedule an appointment.
If you are looking for more information on student loans, download my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans to get the answers you need!