With nearly 44 million Americans saddled with $1.4 trillion in student loans, Fannie Mae is offering those with houses an opportunity to wipe out the debt through refinancing their mortgage. But the option carries as many risks as rewards.
This week, Fannie Mae said lenders who sell loans to the mortgage finance giant can participate in a new program, dubbed the Student Loan Cash-Out Refinance, that helps borrowers pay down education debt. Homeowners with college loans taken on their behalf or for their children can refinance their mortgage and pull out the home equity as cash. The lender uses that cash to pay off the student debt, leaving the homeowner with a larger mortgage at a potentially lower interest rate.
