The Internal Revenue Service has issued guidance clarifying that state student loan programs can use tax-exempt bonds to fund parent loans for students and that tax-exempt bonds can be used for a broad range of refinancings that help student loan borrowers take advantage of lower rates.

Notice 2015-78, issued on Friday, is the first broad public guidance on student loan bonds since they were added to the federal tax code in 1986, apart from guidance on arbitrage-related issues. This guidance in the five-page notice can be applied prospectively to student loans made on or after Feb. 11, 2016 and may be applied to earlier loans.

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