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Alaska student loan interest rates are the lowest they have ever been thanks to a new state program, said Diane Barrans, executive director of the state Commission on Postsecondary Education.
"I do believe at this time the federal loans that we are offering are the lowest in the country," Barrans said.
The state has offered a student loan program since the 1970s. Over the years, Alaska students have borrowed from the state at an interest rate of between 5 percent and nearly 9 percent. Students borrowed $54 million last year. The new AlaskaAdvantage program offers state and federal loans.
AlaskaAdvantage loan interest rates
Federal loan for students going to school in-state: 1.46%
Federal loan for students going to school Outside: 2.46%
State loan for students going to school in-state: 1.96%
State loan for students going to school Outside: 2.96%
A federal loan offered through AlaskaAdvantage allows Alaskans who attend college in-state to borrow at an interest rate of 1.46 percent this year. The same program offers loans for Alaska students who attend school out of state an interest rate of 2.46 percent.
Students who do not meet income requirements for federal loans may borrow from the state at a rate of 1.96 percent for in-state attendance, and 2.96 for out-of-state attendance.
Barrans said it is hard to compare the old loans with the new loan program.
"It's sort of apples and oranges," she said.
Under the old program, Alaska students borrowed at a fixed rate, but under the new program the rate changes yearly. The AlaskaAdvantage rates can go no higher than 8.25 percent. Also, under the old program students who borrowed did not accrue interest until they completed school. With the AlaskaAdvantage program, interest begins to accrue as soon as loans are granted, Barrans said.
Though Alaska students who borrow now may be getting a good rate, students who borrowed under the old program at a higher, fixed-interest rate will not feel any immediate relief. The state student loan corporation is looking into developing a loan consolidation program that will offer older borrowers a lower rate, Barrans said.
State and federal interest rates are dependent on the economy. If the nation's economy is vibrant, rates are higher; if there is recession, rates are lower, Barrans said.
For example, a student who borrowed $5,000 to $8,000 a year between 1996 and 2000, when interest rates were high, may pay close to $20,000 in interest over the 15-year repayment period.
A loan consolidation with rate reduction could lower the debt, especially for students who borrowed when the economy was good and are trying to repay loans and support themselves when the economy is poor.
Loan consolidation benefits the state because it lessens the number of loans that must be monitored, Barrans said.
"We look at it as a win-win," she said.
All loan holders can receive a 0.25 percent rate reduction if they make payments by direct deposit, Barrans added.
Julia O'Malley can be reached at firstname.lastname@example.org.