View of Anchorage, Alaska from a local beach.

The Alaska Student Loan Corporation decreased its base rate for the 2017-18 year to 5.75 percent—a .5 percent reduction from last year’s rate of 6.25 according to the Alaska Commission on Postsecondary Education, spelling good news for student loan borrowers in Alaska. 

While the featured Alaskan corporation offers student loans to state residents attending school in-state or out-of-state, students must attend school within Alaska in order to qualify for the new base rate. Discounts from the interest rate reduction will be used as a credit to the borrower’s account.

The move comes at a time when interest rates are on the rise after the treasury auction which was covered by The Student Loan Report. The new rates—going into effect on July 1 for the upcoming 2017-18 school year—are 4.45 percent for undergrads, 6.00 percent for grad students, and 7.00 percent for Parent PLUS loans.

It can be considered unusual for rates to decrease with any lender regardless of location. The Alaska Student Loan Corporation said that it was able to boost its portfolio size by offering refinancing options for qualifying federal and private student loans. This, in turn, allowed the corporation to offer a lower rate to students.

The reasons behind the Alaskan interest rate decline pose an interesting question. Would federal student loan refinancing create the same effect if applied on the national scale? Should student loan refinancing be pushed more aggressively in federal politics? Or should it be pushed more aggressively at the state level to produce the same effect seen in Alaska? At any rate, is Alaska a special case with their refinancing programs?

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Within the past couple years, multiple actions have been taken with these questions in mind. Several politicians in the federal government have strongly advocated for federal student loan refinancing (student loan refinancing is currently only offered by private institutions) including Senator Sherrod Brown, House Representative John Garamendi, and most notably Elizabeth Warren.

Other efforts to support student loan refinancing have materialized at the state government level. In Virginia, a recent bill was just shot down by Republicans that would have implemented refinancing for Virginian borrowers. In 2016, Minnesota lawmakers released plans for picking up student loan refinancing for borrowers in the state.

At any rate, there are efforts being made across the board to combat mounting student debt, but noticeable effects are yet to be discerned.

Alaska ranks 35th in the nation in terms of student loan debt, with the average amount at $26,699. Research shows that 55 percent of students in the state carry some type of student loan debt according to a study covered by The Student Loan Report. Alaska’s ranking against the nation may improve as a result of the rate decrease, or something much different could happen that remains to be seen.

Image Copyright © Eugen Marculescu