Passage of the legislation is unclear as it does not have bipartisan support (28 of 29 cosponsors are Democrats, 1 independent) and similar measures have failed previously.
Navient had approximately
The proposed legislation would enable student loan borrowers to refinance eligible Federal Family Education Loans (FFEL), Federal Direct Student Loans (FDSL) and private student loans originated prior to
It remains unclear if the new rates (taking into account the admin fee) would persuade a substantial number of borrowers to participate in the program. Fitch believes qualified students with private student loans (and/or borrowers with less stellar credit histories) could benefit greatly given the higher cost of these loans. For example, some lenders currently offer fixed rate undergraduate private loans with APRs ranging from 6.74% to 10.99% and variable rate undergraduate loans ranging from 3.25% (Prime + 0.00%) to 8.25% (Prime plus 5.00%).
To participate in the program, students would also be subject to eligibility requirements which would be established by the DOE. Fitch believes such requirements could result in some adverse selection for holders of student loans as higher credit quality loans would be more likely to be refinanced. That said, higher credit quality loans typically have lower interest rates which may reduce the attractiveness of the refinancing program.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
Source: Fitch Ratings
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