One of the principal ways that Americans stay afloat financially
is by refinancing their existing debt when interest rates fall. The practice
is most predominant regarding real estate financing.
In a shameful bit of federal legislation that is a special-interest bow not
just to a particular industry, but to a particular company, Congress might
actually prevent college students from reducing their debt burdens through
refinancing during and after their time in school. Given that current students
borrow $62 billion a year, the impact on their future indebtedness will be
staggering.
Already, students and former students are allowed to refinance their college loans only once. That defies the notion of a free market. They should be allowed to refinance whenever market conditions make it advantageous, just as home owners are allowed to refinance. Student loans are federally guaranteed, but so are many home mortgages.
Now, the bill being pressed hard by Sallie Mae, a former quasi-governmental agency that is now a private entity, would drive up interest rates for current students while locking them into interest rates that are well above market rates for other types of financing.
Instead of propping up a student loan near-monopoly, Congress should try to create the same vigorously competitive market for student-loan refinancing that exists for home refinancing.
©The Times-Tribune 2005