April 27 (UPI) -- Mortgage security company Fannie Mae announced new guidelines to swap student loan debt for mortgage debt.
The option to refinance student loans by acquiring mortgage debt, typically an attractive preference because mortgage interest rates tend to be lower than student loan rates, is an expansion of a Fannie Mae program begun with personal finance company SoFi in 2016. The expansion was announced Tuesday.
Borrowers who take advantage of the swap would forgo use of income-driven repayment programs or the Public Service Loan Forgiveness option for federal student loans. It could be an attractive alternative, though, for college graduates with steady paychecks.
"It's probably a good option if you have a solid income and stable job," Rohit Chopra, senior fellow of the Consumer Federation of America, said. "If you are concerned about your financial future, you want to be really careful about putting your home at risk."
Studies indicate a correlation between home ownership and college attendance, although college attendees with student debt have, by age 25, lower home ownership rates than those who have no student debt, the Federal Reserve Bank of New York noted earlier in April.