ND student loan refinance program proving popular, used as recruitment tool
FARGO—Maggie Burke found herself as a newly minted college graduate facing student loan debt of $30,000 and paying interest rates ranging from 11 percent to 14 percent.
That translated into monthly payments of about $780. Prospective school loan obligations that seemed unremarkable as a high school senior, when she was planning her college path, suddenly seemed like an overwhelming burden to carry when starting out on her career.
Soon, however, she'll be able to slash her monthly payments or shorten her payback term by refinancing her student loans through a program of the Bank of North Dakota—and will join more than 8,000 borrowers who have refinanced college loans exceeding $380 million.
The DEAL One program, launched in 2014, is available to graduates who have lived in North Dakota for at least six months. Burke, who has marked her calendar, becomes eligible in August.
Burke, a native of Connecticut, recently learned about the program at Microsoft, where she got a job in sales after graduating last year from Northeastern University in Boston.
"The first reaction was ... really?" Burke said, recalling her response to learning of the refinancing program during a lunch-and-learn seminar at work.
Once Burke refinances her loans under the program, her interest rate will drop steeply to 2.15 percent, the variable rate option. The fixed loan rate is 4.33 percent.
The average loan balance for participants in the refinancing program is $47,400, with loan rates often ranging from 6 percent to 14 percent, according to bank figures.
"There's a lot of loans that are in excess of a $100,000 balance," said Tim Porter, the Bank of North Dakota's chief financial officer. Those high balances usually are owed by people who attended medical school or law school, he added.
Rates under the program just dropped because of the low interest rates, a boon to those refinancing under the program, and the current rates will remain in effect until Sept. 30.
"This low interest rate environment is certainly helping the students take care of this debt," Porter said.
For instance, a person owing $35,000 in student loans borrowed at 6.8 percent now paying $242.93 monthly could reduce those payments to $191.18 at the 4.33 percent fixed rate or to $150.92 with a 2.15 percent variable rate.
Burke is still mulling whether to significantly reduce her monthly payment or to shorten her loan payback period, which now would take about nine years.
She's told her East Coast friends about the program, and their perception of her move to North Dakota abruptly changed.
"It went from, 'Maggie, why are you moving to North Dakota?' to 'Shouldn't everyone move to North Dakota?'"
She quickly added, "I don't think anybody would move here specifically for the loan program," but the program helps significantly.
Burke's parents have been helping with her college loan payments, and she's still on her family's calling plan. The lower interest rate will enable her to spare her parents those expenses.
Microsoft is one of North Dakota's large employers that are promoting the DEAL One program, which some employers view as a valuable recruiting and retention tool.
Don Morton, site leader at Microsoft's Fargo campus, estimated that about 100 young professional recently hired could take advantage of the student loan refinancing program. He invited representatives of the Bank of North Dakota to give a presentation for employees.
"They move here because of the job," Morton said, adding that 51 percent of recent hires come from 25 states outside of North Dakota. "When they get here they find this is a pleasant surprise," he said, referring to the Bank of North Dakota's refinancing program.
The Bank of North Dakota also has been asked to make a presentation for large employers in the Dickinson area and will be doing the same in Grand Forks, said Shirley Glass, who oversees student loan programs at the bank.
Sen. George Sinner, D-Fargo, a co-sponsor of the bill establishing the refinancing program, said the idea came to him while he was helping two of his children navigate their college finances.
"I would have to say this has worked better than expected," he said, referring to the $380 million in refinanced loans so far. "It's a terrific program."
Sinner would like to see a comparable program at the federal level and said ways must be found to restrain college costs.
Those who have refinanced their student loans through the program have seen significant benefits, including a boost to their financial independence, Glass said. She's heard from people who have been able to move out of their parents' home, can afford to have a child or no longer find themselves living paycheck to paycheck.
"You hear those stories, and you know you're doing the right thing," she said.