Hundreds of thousands of Virginians are swimming in student loan debt. An estimated 629,000 could benefit from refinancing at lower rates, according to some state legislators. Three legislators are proposing bills aimed at helping borrowers get out of debt.
Delegate Marcus Simon (D - Fairfax) says he continues to hear from college graduates who say student loan debt is preventing them from buying homes, cars, or starting businesses. He and Senator Janet Howell (D - Reston) are again proposing a Student Loan Refinancing Authority to help borrowers refinance at lower rates.
"Sometimes even ten to twelve years later, 'I have to keep renting, I can't qualify for a mortgage because I've got too much student loan debt,'" Delegate Simon recalled graduates saying to him.
Their Student Loan Refinancing Authority would offer current students loans and borrowers a chance to refinance. The loans would be funded through selling tax-free municipal bonds.
Explained Simon, "We can help people refinance their loans, pay off those 9, 10, 11 and a half percent student loans, loan the money back out at 4.5 percent. Because you can sell the bonds for two, loan the money for 4.5, use the spread to fund the operation of the Authority and make new loans."
Rhode Island, Connecticut and North Dakota already offer similar programs. Borrowers would need good credit and meet the same criteria as they would for traditional loans.
Simon is also proposing loan servicers in Virginia be licensed and that the state have an ombudsman to help borrowers understand their loans.
Meantime, Delegate Marcia Price (D - Hampton) is introducing a bill also to create a Student Loan Refinancing Authority. But it would provide financing to private lenders, which would then offer student loan refinancing.
But not everyone wants Virginia in the student loan business.
Responded House Majority Leader Kirk Cox (R - Colonial Heights), "I just don't think we want to get back in that business. We were in that business before. That's got some problems with it."
Cox said he'd rather that the state offer more financial aid to incentivize students to complete their degrees in four years.
"I want to try to reward kids that that move up from the freshmen, sophomore, junior years and increase their financial aid. We tend to front load it for freshmen," said Cox.
The Simon/Howell proposal for a Student Loan Refinancing Authority was tabled last year so it could be studied by State Council of Higher Education for Virginia. SCHEV has now issued a report of recommendations. We'll update you on the progress of these bills.
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