WASHINGTON, Dec. 15 (UPI) — State and local governments nationwide have passed laws allowing them to refinance federal student loans, seen as a way to propel economic growth and chip away at education debt that is holding back young professionals.
Montgomery County, Md., is the latest to look to set up a student-loan refinancing authority, giving the county a chance to extend low interest rates to borrowers. Already several states, including California, Maine and Minnesota, have created refinancing programs.
“If we’re able to say, ‘If you come to Montgomery County, we’ll help you refinance your student loans and lower your cost of living,’ that’s a very powerful, very attractive incentive,” said Montgomery County Council member Tom Hucker. “It could help retain the graduates of our high schools that we’ve already invested in. We want them to stay here, start families and businesses, own houses.”
Student loan borrowers across the country owe some $1.2 trillion. With about $103 billion in default, some experts say a generation of young adults is being crushed under overwhelming debt, causing a trickle-down impact on the economy.
For decades, states issued federal student loans through their own student loan authorities or banks. In 2010, after the U.S. Department of Education began issuing loans directly, state agencies began closing their doors. Today, many states are reviving their agencies, which finance loans through tax-exempt bonds, as a mean to invigorate growth on a local level.
Connecticut was one of the first to sign into law measures that allow student-loan borrowers to refinance at lower interest rates and outline ground rules for student loan servicers.
“As we deliver record high graduation rates in our high schools, we need to ensure that residents have access to affordable higher education. It’s central to growing our middle class. College should not – and cannot – be out of reach for Americans,” Connecticut Gov. Dannel P. Malloy, a Democrat, said.
In October, the Philadelphia City Council approved a special committee to examine how student loans are impacting the community. The goal is to determine why Philadelphia natives leave for college and don’t return.
“We want them to come back and raise a family here,” City Councilman Dennis O’Brien said. “We need to make that education within people’s reach.”
