Lawmakers in Montgomery, Maryland are in the process of developing legislation that would allow them to “establish a loan authority,” a move that would give the county the ability to leverage its municipal borrowing power to extend the lowest interest rates to its residents. It’s also a way the county hopes to attract young, college-educated workers and entrepreneurs.
If the bill succeeds in the next legislative session, Montgomery would join a growing list of states entering the student loan market to ease the burden of student loan debt for its residents. Minnesota, Maine, North Dakota, California and Connecticut have passed legislation that allows them to refinance student loans, while politicians in Virginia and Wisconsin are fighting for the same. Proponents say student loan debt has become a significant economic barrier, keeping people from full participation in the local economy.
However, refinancing federal student loans through state authorities could mean forfeiting consumer benefits like income-driven repayment plans and public-service loan forgiveness. At this time, there are few options for lowering interest rates on student loans. Consolidating federal loans will bring down the rate by only a small percentage, because the interest is calculated by taking an average of those rates. Consumers who are considering these programs need to evaluate what they might be giving up. If the interest rate difference is not that much, it may not be worth it.
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