Franken: We need to refinance student loans

Franken (MPR)

U.S. Senator Al Franken is cosponsoring a bill that would enable borrowers to refinance old student loans.

The Minnesota Democrat says interest rates as high as 10 percent are one reason graduates carry so much debt.

“It’s not good for the economy,” he said. “It prevents Americans from making the kinds of decisions that help economic growth, decisions — to buy a home.”

Under the Bank on Students Emergency Loan Refinancing Act, authored by Sen. Elizabeth Warren (D-Mass.), both public and private loans could be refinanced at current rates. Those are 3.86 percent for undergraduate loans, 5.41 percent for graduate school loans, and 6.41 percent for parent loans.

Hamline University graduate student Will Schultz told reporters he’ll have about $160,000 in debt when he’s done. The interest rates on some his loans are at 8 or 9 percent.

The bill “would be a godsend for me,” he said. “It would give me a chance to do things that I would want to do.”

Analyst Tricia Grimes at the state Office of Higher Education estimates that refinancing a 15-year, $30,000 loan from 6.8 percent could save a borrower more than $8,000 over the life of the loan.

This session, Minnesota legislators have also been considering legislation that would allow the state to form its own refinancing program.

Grimes said that if the federal legislation passed, it would negate the need for the state program.