Under a federal program to help low-income borrowers, Rejon, who lives in Chicago and has struggled to find a job, isn’t making payments.

“I’m trying to at least get my life on track and be able to pay my bills,” she said. “The loans are the last thing I’m thinking about.”

Screening Borrowers

Rejon wouldn’t qualify for refinancing from private lenders because they screen borrowers based on creditworthiness and university quality. The government writes loans for any student who enrolls in an institution eligible for federal aid.

Borrowers holding about $150 billion in federal loans have strong enough credit that private lenders could offer a cheaper rate, Goldman Sachs Group Inc. estimated in a March report.

Refinancings are likely to reduce by as much as $10 billion to $20 billion the value of the federal portfolio because of lower income from loan payments, primarily for graduate school, according to Deborah Lucas, former chief economist at the Congressional Budget Office and now a Massachusetts Institute of Technology finance professor. Education Department spokeswoman Denise Horn said prepayments aren’t yet significant, and the student-loan program’s goal isn’t to turn a profit for the government.

Undercutting Government

The situation is another consequence of historically low- interest rates, as well as a peculiarity of higher-education finance. Congress sets federal student-loan rates, and older obligations now demand as much as 8.5 percent annually. For decades, government loans undercut the private sector. Now it’s the other way around.

Congress could let all federal student borrowers refinance at lower rates through the government itself, as Democratic U.S. Senator Elizabeth Warren of Massachusetts has twice proposed in the last year, to no avail. Republican opponents said the bill did nothing to curb the current and future cost of college.

That leaves an opening for newcomers like SoFi, formally known as Social Finance Inc., and established players such as Citizens Financial. Private lenders have refinanced about $3 billion to $4 billion so far, according to Stephen Dash, chief executive officer of Credible.com, a website that compares refinancing rates.