College students and their parents will be able to take advantage of long-term savings now that the state’s supplemental education loan agency has dropped its interest rate almost two percentage points to the lowest rate in its 33-year history.
Loans through the Connecticut Higher Education Supplemental Loan Authority are available to students who need additional aid in financing a portion of their education after they have exhausted other resources including federal student aid. Parents or other family members commonly sign as co-borrowers.
The 4.95 fixed-rate loan in effect for the 2015-16 school year is down from the current 6.75 rate. A similar program at the federal level carries an interest rate of 6.84 percent.
Higher Education and Employment Advancement Committee Chairwoman and State Rep. Roberta Willis, D-Salisbury, called the rate cut “significant” and said it’s not just about affordability and access to education for all, but also about the state’s financial future.
She cited a 2013 study from the Georgetown University Center on Education and the Workforce that projected 70 percent of all Connecticut jobs will require a post-secondary education by 2020.
That’s higher than the national rate of 65 percent, according to the study. It also found the highest proportion of bachelor’s and graduate degree jobs would be concentrated in the northeast.
CHESLA Executive Director, Jeanette Weldon, said the quasi-public organization has funded more than 41,000 loans totaling about $400 million since it began in 1982.
The move comes as a bill calling on the agency to address heavy student loan burdens sits on the governor’s desk. The legislation, which gives refinancing capabilities to the state supplemental loan authority as a way to make existing loans more affordable for students in Connecticut, also calls upon the agency to develop a plan to lower interest rates.
Weldon said the lower interest rate was made possible by the supplemental loan authority’s ability to draw on funds from the Connecticut Student Loan Foundation as part of its bond financing.
State Rep. Matthew Lesser, D-Middletown, whose Banking Committee was also integral to the legislation, said the two student loan groups have only been under the same authority for about a year. The bill was crafted to reinforce legislative support for using Student Loan Foundation funds to lower CHESLA interest rates, according to Lesser.
Julie Savino, CHESLA vice-chairwoman and executive director of student financial assistance at Sacred Heart University, said the agency is also exploring initiatives to loosen eligibility requirements and repayment terms, establish a need-based scholarship program and allow for deferments for graduate students.
Weldon said she remains confident in the agency’s underwriting criteria even as revisions are considered. “We do think that our underwriting criteria are strong enough so that the right candidates, those who are credit-worthy enough to handle this debt are the ones who will apply and be approved,” she said.
A report released last year by the independent Institute for College Access and Success put Connecticut in the number six spot on its list of high-debt states. Connecticut students attending public and nonprofit colleges and universities carry an average of $30,191 in debt, according to the study. Only Minnesota, Rhode Island, Pennsylvania, Delaware, and New Hampshire are higher. The report did not include statistics from private universities.
The report cited 2012 federal statistics that showed bachelor’s degree recipients at for-profit colleges were 29 percent more likely to have loans than graduates of public and nonprofit colleges and owed 43 percent more.