High student loan rates can make paying down debts difficult

People in Florida who struggle with credit card debt and pay lots of interest in other types of loans may have had the opportunity to refinance their debt — sometimes avoiding personal bankruptcy in the process. But while people in Fort Lauderdale and around the country have been able to refinance mortgages, car loans and other types of debt, one common — and very large — kind of debt generally has stayed at the same rate: student loan debt.

There are multiple reasons for this. For one, the federal government sets the interest rates for most student loans; private lenders don’t want to run afoul of regulators or Congress if they were to attempt to undercut the federal rate.

Another reason is that the government does quite well by being in the student loan business. One estimate is that the government will make a profit of more than $30 billion on student loans — something that would be tough to give up given the state of the economy.

Student loans are a huge business in this country. Cumulative student loan debt is now more than $1 trillion, and the government is involved with backing more than 85 percent of it.

Even if student loan rates are not good candidates for refinancing, there may be other ways for people to improve their financial situations — including, depending on the circumstances, Chapter 7 or Chapter 13 bankruptcy. An experienced bankruptcy lawyer can help people experiencing financial difficulty to decide what would work best for them.

Source: Time, “Why Can’t People with Student Loans Refinance at Better Rates?” Dan Kadlec, Feb. 20, 2013