Graduates from Minnesota are catching a break. The state recently released a refinancing plan that will help manage loan debt for those with high-interest loans, providing much needed path forward towards cutting away at the $1.4 trillion in student debt.
Typically, during repayment students have several options to manage their monthly bills, but not all are a perfect fit. In some cases, interest rates at the time of borrowing may have been relatively high, leaving individuals with payments they couldn’t make. To help with this, some programs offer refinancing to consolidate student loans with new terms such as lower interest rates or extended repayment period, and that’s precisely what Minnesota has done.
Launched in January, Minnesota’s Office of Higher Education created the SELF ReFi program, specifically to manage high interest rates for those meeting specific criteria. The goal is to help make payments affordable, changing interest or other costs for those who need it.
Marilyn Kosir, manager of the program, has said that roughly 725 students have signed up for the program. The amount, she adds, is surprising as the program assumed it would not have as much popularity versus other ways to repay.
Kosir stated that before the program, many were paying more than 13 percent in loan fees. Subscribing to the SELF program, however, allows them to refinance their rates to as low as 4 to 6.5 percent. If they qualify, variable rates can go as low as 3 percent, depending on the loan itself. While Kosir explained that though it’s not clear how much money is saved through this refinancing yet, slashing the interest rates does have an immediate benefit.
Another added benefit is citizens of Minnesota aren’t on the hook for paying through taxes. The program is designed to operate without additional tax rates, using state issued bonds to fund the refinancing. The rest will be repaid by those using the refinance program. Currently, the agency approved roughly $25 million for refinance loans, averaging around $36,000 individually. If needed, the total amount for refinancing loans can stretch as high as $100 million.
Despite these benefits, Kosir stated the program isn’t for everyone. The idea is to refinance loans, but they are directed towards graduates only. The program is only for Minnesota residents and those who have completed an associates, bachelors, or certificate degree. They must also have proof of employment and make a certain level of income. Their credit will be checked to assure they have the means to properly repay the loans owed.
In total, their loans must not exceed $70,000 if they attended a four-year program, or cannot exceed $25,000 for a two year. If they don’t qualify, graduates are encouraged to utilize the Department of Education’s flexible repayment programs to help.
Ultimately, Kosir cautioned that while the refinancing options are helpful, it is a finalized solution. Graduates who elect to use SELF will lose all federal repayment benefits if they choose to consolidate their loans as they will turn into private student loans after. The program should only be considered if interest rates are simply making monthly payments too high.
At the least, this is a beneficial program for many that have high debt and high interest rates. Repaying student loans can present numerous challenges and thousands go into default if they don’t have the assistance they need. Hopefully this will allow Minnesota graduates to get things back on track in face of monetary turmoil.