Approximately 2,900 Rhode Island Student Loan Authority (RISLA) borrowers will have their outstanding student loan balance reduced as part of a Loan Forgiveness Program announced Wednesday by RI General Treasurer Seth Magaziner and Charles Kelley, Executive Director of RISLA.
RISLA can reduce these student loan balances as a result of the strong performance of the bonds it issues.
“Our ability to offer this loan forgiveness program is largely driven by the timely repayment of these loans which in turn, kept the net default rate for this program to less than two percent,” Kelley said in a statement. “Our mission to provide students and families with safe, low cost loans that minimize the burden of borrowing with the lowest interest rates in the country is considerably aided by our responsible borrowers who share the credit in making this loan forgiveness program possible.”
Last year RISLA was able to help over 4,500 students and families save thousands of dollars with low fixed rate in-school and refinancing loan programs.
“As the cost of college and vocational training continues to rise, this loan forgiveness is welcome news to student loan borrowers who are making every effort to pay off their loans,” said Magaziner, who serves on the agency’s board of directors. “RISLA is a valuable resource for Rhode Island students because they offer high-quality student loans and exceptional support for borrowers.”
Tax exempt student loan bond issuers like RISLA have the ability to forgive a portion of a student loan if an individual bond issue performs significantly better than expected after seven to 10 years of loan repayment history and incurs very low defaults. RISLA has taken this opportunity to reduce the balance of loans in the impacted bond issues without risking a rating downgrade or negatively impacting bond-holders.
RISLA will offer partial loan forgiveness on loans funded by RISLA’s 2010-A, 2012-A and 2013-A bonds. A total of 3,900 loans will be partially reduced at a value of $2.4 million.
Borrowers whose loan is being partially forgiven have been notified via letter from RISLA and the amount forgiven will automatically be applied to the individual’s account. The amount of the loan forgiveness is dependent upon the tax-exempt bond issue that funded the loan and calculated based on a percentage of the dollar amount outstanding on the loan as of May 31, 2019.