MN Senate considers bill allowing state to refinance student loans

The state Office of Higher Education would be able to refinance student and parent loans under recently proposed legislation.

The bill’s author, Sen. Greg Clausen  of Apple Valley, says he has heard complaints that interest rates on many private loans are too high, and repayment plans too inflexible.

“We talked to students who are carrying loans anywhere from nine to 12 percent,” he said. “And if we can lower that down into the three-, four percent, that’s a considerable savings.”

Clausen said as many as 18 states have started loan-refinance programs in the past few years, but do so in limited numbers.

Several members of the Senate higher-education committee said they support the idea. But they wanted more details on financing and oversight of the operation.

“I love this concept,” said DFLer Kathy Sheran of Mankato. “I think it’s really ripe and needed. But we have to be responsible about how we roll it out.”

A version of the bill was introduced last session, but didn’t gain traction.

Clausen said this year it’s one of three bills designed to help ease the cost of college. The other two attempt to lighten the burden through various tax credits.

The committee approved the bill and forwarded it on to the Senate finance committee for further study.

  • Thomas Mercier

    I get that the government offers student loans as an incentive to pursue education. I also get that private loans carry higher rates because they aren’t subsidized by the government. I even get that it’s a bummer if you take out a loan expecting the economy to keep chugging along but it doesn’t so you’re left with a rate that you can’t meet because you’re underemployed. But I don’t know if I feel that it is the government’s role to bail out individuals who took out loans with high rates and are now facing the challenges created by taking such a risk.

  • Denise Gathman

    It has some merits. Pay off the loan principal and then collect the interest the feds would have recieved. Even with defaults and admin/servicing costs it could be a positive income stream for several years.