ANCHORAGE — Alaska’s interest rate for college student loans is 7.3 percent, far higher than the federal government’s 3.86 percent, and an Alaska lawmaker wants to make the state rate more competitive.
“It’s pretty embarrassing when the federal government treats students twice as well as we do here in Alaska on student loans,” Rep. Les Gara told the Anchorage Daily News.
The federal rate comes courtesy of a bipartisan deal that ties student loan rates to markets. Gara, D-Anchorage, hopes to lower state rates through House Bill 17
The measure would have the effect of reducing Alaska’s student loan rates by about 3 percent for students who study in Alaska or who return to the state after attending college Outside.
HB 17 and previous versions have made little progress in the Alaska Legislature.
Diane Barrans, head of the Alaska Student Loan Corp., said federal rates are heavily subsidized by taxpayers. Alaska’s loans are not and the 7.3 percent rate is the best the corporation can offer based on market rates, she said.
Gara’s plan is aimed at Alaska residents who complete studies in what’s deemed a timely manner. Those who quality could apply to reduce their loan principal, which would have the same effect as a lower interest rate but is easier to administer, Barrans said.
However, it would require an annual legislative appropriation of around $3 million, Barrans said.
Only one in four Alaskans complete college within the “timely manner” defined by the state — 150 percent of the time a program is supposed to last. Two-thirds have someone co-sign on loans. Barrans questions whether the benefits would be enough to make graduates return.
Gara says he’s open to other ideas on how to lower student loan rates.
“If a dysfunctional Congress can come to a compromise, we can come to a compromise,” Gara said.