Although interest rates for student loans are at their lowest in years, borrowers like Gene Riccoboni won't be able to take advantage of them through refinancing.

"I couldn't believe my ears when the woman told me I could only refinance once," said Riccoboni, who works as a technology lawyer in New York, has a wife and four children and owes $70,000 in loans. Riccoboni pays a rate of 6.45 percent, far above the 3.42 percent made available for students applying for loans on July 1.

Riccoboni is one of nearly 838,000 borrowers whose student debts were locked into a fixed rate when they refinanced through the federal government's loan consolidation program.

Congress changed federal student loan consolidation (search) from variable to fixed rates in 1998, leaving students unable to take advantage of refinancing options as rates lowered. The current program allows borrowers to lock in at an average rate of three or more outstanding loans, combine them and pay one monthly bill.

"A lot of students consolidated their loans because they had a really good interest rate and they figured rates would only go up over time," said Ivan Frishberg, a spokesman for the Higher Education Project at the U.S. Public Interest Research Group (search) in Washington, D.C.

A few years ago, 8 percent was considered a good rate.

"They got locked in at that rate" and can't do anything about it now that rates have plunged to historic lows, Frishberg said.

According to the PIRG's Higher Education Project 2002 report "The Burden of Borrowing," 39 percent of student borrowers now graduate with unmanageable debt, meaning their payments are more than 8 percent of their monthly incomes. In 1999-2000, 64 percent of students graduated with debt, with the average debt having doubled over the past eight years to $16,928.

With student loan debt totaling a record $81 billion in 2002, assistance in this arena is critical, said Cameron Johnson, spokesman for U.S. Rep. David Wu (search), D-Ore., who plans to introduce legislation that would change the consolidated loans to a variable rather than a fixed rate to allow students to refinance their debt at the best possible rates.

"(Wu) sees education as an appreciable asset – like investment in real estate. We support investment in real estate by allowing people to refinance their mortgages to take advantage of low interest rates," said Johnson. "Congressman Wu supports allowing students to do the same thing."

"As a father of a college graduate and another still in college, I know all too well the costs of higher education," said Rep. Rob Simmons, R-Conn., who has signed on as a co-sponsor of Wu's bill, the Student Loan Fairness Act (search).

"That's why I support giving students and graduates the ability to refinance student loans at the best rates possible," he said.

Other members are introducing their own bills, including Rep. Rosa DeLauro, D-Conn., and Rep. Danny Davis, D-Ill. They are hoping to include their measures in the reauthorization of the Higher Education Act (search), which is expected to be addressed in Congress by the end of the year or in early 2004.

DeLauro's College Loan Assistant Act (search) would not only strike the ban on refinancing consolidated loans, but eliminate many of the fees and increase the declining Pell Grant to $7,000 per student.

But not everyone agrees that further subsidizing the student loan process is the right way to go. Harrison Wadsworth, special counsel to the Consumer Bankers Association (search), said changing the current consolidation structure to allow for refinancing could end up costing the government billions of dollars, and take away opportunities for sizable loans to new students coming into the system.

"CBA is sympathetic to the problems borrowers are now having," he said. "Over the years, CBA has said, be careful when you consolidate – in may not be in your best interest in the long term. Lo and behold, interest rates are not as high now."

Critics of the recent push to allow for refinancing say less revenue than expected will find its way back into government coffers, and student loan subsidies will have to come from somewhere else. On top of that, the government guarantees the loan, meaning that if the student defaults, or the interest rates go up, the government steps in and pays the difference.

"We think the consolidation program needs to be rethought," said Wadsworth. "CBA does understand that some borrowers have gotten a bad deal and we'll be working with Congress to find a way to help them – but it has to be something that isn't going to make it impossible to access higher education."

Suggestions include targeting just those borrowers who locked in at 7 or 8 percent rates. Others, including Wu's proposal, would impose a one-time fee each time a borrower refinanced their loan.

Riccoboni said the logic of helping borrowers like himself finish paying off their student loans through lower interest rates is the same used by supporters of the recent tax relief package passed by Congress and signed by President Bush.

"In theory, people would have much more money to spend – it could, with the wave of the pen, stimulate the economy," he said. "And I think it would reduce the overall pressure on people – from a balance sheet standpoint. I think that is the main reason why they need to do this."