View of Anchorage, Alaska from a local beach.

There was good news for student loan borrowers in Alaska: 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. The move comes at a time when interest rates are on the rise after the treasury auction with many lenders adhering to the market trend.

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

This development comes after federal student loan interest rates were recently raised. The new rates—going into effect on July 1 for the upcoming 2017-18 school year—are 4.45 percent for undergrads, 6 percent for grad students, and 7 percent for 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 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