ST. PAUL, Minn., Jan. 15 (UPI) -- Struggling student loan borrowers in Minnesota may see an extra $200 a month in their pockets thanks to a state-run education debt refinancing program.
Lt. Gov. Tina Smith unveiled the SELF Refi program allowing eligible students to possibly reduce their monthly payments through lower interest rates, between 3 percent and 7 percent. Managed through the Minnesota Office of Higher Education, the program will be run through bond sales.
Smith said the average Minnesota borrower owes $31,579 in higher education debt loans. The refinance program is "an important first step to improve college affordability and increase educational opportunities for all students." To qualify, borrowers must have FICO credit scores of 720 or higher. Those with scores of at least 650 must have a co-signer with a 720 or higher score.
Eligible applicants must also be Minnesota residents and have completed at least one post-secondary credentialed program. The governor's office said "the majority of all students" will qualify for a loan. Officials estimate a borrower with $40,000 in student loans at an 8 percent interest rate could save up to $200 a month, or up to $25,000 over the life of the loan.
"Our primary goal in structuring SELF Refi was to create a program that offers a cost-savings for borrowers and is sustainable for the long-term," Higher Education Commissioner Larry Pogemiller said. "If this program is successful, we are optimistic it can be expanded to include more student loan borrowers in the future."
Mike Uran, financial aid director at St. Cloud State University, said the program could help borrowers who have private student loans with high interest rates, but may not be beneficial for those with federal loans with lower interest rates. Federally backed student loans have many repayment options that may work better for borrowers.
Minnesota's new plan is just part of a nationwide push to alleviate the crushing student loan debt that has buried millions of borrowers. Rising college costs have pushed outstanding student loan debt to $1.2 trillion nationwide, with about $103 billion in default.