“For borrowers who have larger loan balances, no cosigner, or are in financial distress, those people have no options. Nobody is going to refinance them.”

Source: The Boston Globe

As the national student, loan debt grows the current generation is being crushed. For those students drowning in debt, it’s hard to get your head above water. Recently, private lenders have started getting into the refinancing market for student loans. However, the Boston Globe reported that those lenders are leaving behind the borrowers that truly need the help.

Adam Minsky, a Boston lawyer specializing in student loans stated, “The options are geared to people who have excellent income, and excellent credit history. It’s doctors and lawyers. Those are the people who are benefiting from the refinancing programs,” he also went on to say, “For borrowers who have larger loan balances, no cosigner, or are in financial distress, those people have no options. Nobody is going to refinance them.”

Interest rates for private student loans can be as high as 12.5%, much higher than most consumer loans. “I wonder how other young families are dealing with this,” Kelly Franco, a Boston high school teacher, said. For the 27-year-old teacher, refinancing her private loans simply wasn’t an option based on her salary, expenses, and debt. She had applied for income-based repayment from the government and hoped to see some forgiveness for working as a teacher, however, her loans are still a burden. Franco pays $600 a month for her student loans and worries she won’t be able to save enough money to send her son to college.

The Center for Investigative Reporting revealed this summer that by privatizing the system, the federal government can get as much as a 20% return on loans. “The law gave lenders tremendous leverage over student debtors, no matter how dire their circumstances,” said Daniel Austin, a bankruptcy law professor at Northeastern University, “It’s really awful what we’ve done.”

“The irony is that the highest earners, who could pay off their debt no matter the interest rate, are the ones who end up saving money and paying their loan off quicker with private loan refinancing,” said Kevin Fudge, manager of the consumer advocacy at Boston-based American Student Assistance. Fudge went on to talk about how borrowers now have to take any discretionary income from gifts and their jobs and pay down their loans as fast as possible.