State legislators make a plan to get Minnesotans on a better financial path.
If you’re a student loan borrower and resident in Minnesota, state officials may have just introduced a program that could help you pay off your debt faster so you can finally get on with the rest of your financial life. The Star Tribune reported last week that Minnesota is rolling out a new program that could help thousands of state residents by offering them a new way to refinance and reduce the monthly payments on their loans.
The new program offers some unique options that other student loan solutions don’t. First, the plan can apply to both federal AND private student loans as long as the money was used for qualified education expenses. Federal student loan consolidation programs only allow for federal loans to be consolidated, so this program offers relief for borrowers who relied on private loans rather than federal to fund their education costs.
The other big difference is the term of the refinanced loans. With federal consolidation, the term on the new consolidate debt is always 25 years. Most federal loans start with a term of 10 years, so extending the term by 15 years is an easy way to reduce the monthly payments – you pay everything back, but because you have more time to do it the monthly payments are reduced.
However, this new program allows the borrower to tailor the term and payments to their needs. Terms can be as short as 5 years for borrowers who want to pay more in order to get out of debt as quickly as possible, or the term can be extended up to 15 years for borrowers who need to reduce the monthly burden by lowering their payments.
“The new refinancing option could lower monthly payments between $200 and $300. If the same borrower chose a quicker repayment option, they could save $25,000 in interest charges,” says Larry Pogemiller, Minnesota’s Higher Education Commissioner.
The program does have caps for the maximum loan amount that can be refinanced under the program. Loans taken out for a bachelor or graduate degree up to $70,000 can be refinanced, while loans for two-year diplomas and certificates cap out at $25,000. The state’s goal is to help borrowers – particularly young adults just starting out – to overcome the immense financial burden that student loans can represent.
“If a student is graduating with such a high debt load, it makes it just so much more difficult for them to do so much more in our economy, whether it is buy a house or start a small business or buy a car,” affirms Lt. Gov. Tina Smith. “If we want an economy that works for everyone in Minnesota, we cannot allow these high debt loads to put a crunch in our competiveness.”