For people saddled with federal student loans, the government might not be able to offer lower interest rates or simpler repayment systems – but banks and credit unions might.
Citizens Financial Group recently announced that it would start refinancing federal student loans. Borrowers with good credit can now secure variable rates as low as 2.31% and fixed rates as low as 4.74%, both on an annual basis. In a similar program for borrowers with private student loans, the Providence, Rhode Island-based parent of Citizens Bank says participants lowered the average annual percentage rate on their debt by 1.5 percentage points.
For people like Ali Goldberg, who graduated from Pennsylvania State University in May with a degree in English and is currently living with her parents in New Jersey, programs like these may provide some relief. Like seven out of 10 members of the class of 2013, Goldberg has federal student loans to pay off. She recently got a letter informing her that she’d have to start making payments in three months. While she doesn’t see her student loans as a huge burden, the debt has affected her life after graduation.
“I try not to let it affect my decisions, and my parents don’t pressure me in that way,” Goldberg says. “But there are certain things I would do if I didn’t have loans on the back of my mind.”
To an extent, it has narrowed her job search. After exploring jobs in Boston and other cities, she decided that the best financial option would be to live with her parents and commute from home, perhaps finding full-time employment in New York City. “I don’t mind living at home, so why not take advantage of New York, try to save money for a bit so I’m able to pay back my loans?” she says.
Like Goldberg, many recent graduates are finding that loans they took for school have limited their options. Currently, there is about $1.2 trillion of outstanding student debt in the U.S. The average borrower owes $29,400, according to the Institute for College Access & Success. Those who have several outstanding loans might find more freedom through refinancing programs that offer lower interest rates and reduced monthly payments on a debt-consolidation loan that pays off several smaller notes.
Citizens’ debt-consolidating refinancing plans aim to give students relief, Brendan Coughlin, the president of education finance for the bank, said in a statement announcing the new program.
“While a college education is one of the best investments a young adult can make, paying for it afterward while trying to achieve other financial milestones can be difficult,” Coughlin said.
In addition to Citizens, several other organizations have also started programs to help students cope with federal loans. CuStudentLoans connects users to a network of credit unions offering refinancing options. San Francisco-based peer-to-peer lender SoFi, which offers benefits such as unemployment protection to borrowers, also provide alternatives to college graduates looking for lower rates.
Graduates like Goldberg can also choose to refinance federal loans through the government. That may not save them a lot of money, but it will preserve the option to take advantage of benefits such as pay-as-you-earn systems and debt forgiveness. Through a Direct Consolidation Loan, students can combine multiple federal loans into one with a fixed interest rate based on a weighted average of the rates on the loans.
Other financial institutions are also offering more options to students dealing with debt. Boston-based First Trade Union Bank recently rolled out a debit card rewards program with Simple Tuition’s SmarterBucks unit. The program gives consumers rewards on all non-PIN purchases made with the debit card and converts the rewards points to cash that goes toward paying off the user’s student loans.
“We think we’re a little closer to millennials when it comes to providing them with financial solutions,” says Mike Butler, First Trade’s president and chief executive, in discussing the program with Simple Tuition and its initiatives. “This is a company that’s trying to help a very, very big problem in today’s society.”
Lawmakers in Washington have also grappled with the issue. Sen. Elizabeth Warren, D-Massachusetts, has introduced a bill that would allow students to refinance their school loans at rates as low as 4%. Republicans blocked the measure in June and again recently, on the same day that the Citizens and First Trade programs were announced. But privately financed relief isn’t necessarily for everyone.
In New Jersey, Goldberg says she’d have to consider her options when deciding whether to go with a private lender to consolidate her school debts.
“I feel like I would have to be really well-educated on what refinancing would mean,” she says. “I don’t know where I’ll be in the next two years. I might go to grad school. I might have even more loans.”
Student loan illustration via Shutterstock.
Source Article http://ift.tt/1y39EC7
0 comments:
Post a Comment