- A proposal in Maine would forgive up to $40,000 in student loans for first-time homebuyers.
- Maine’s senate president said it could help the labor shortage by bringing in younger workers.
- The offer may come as the federal government remains stalled on broad relief for borrowers.
In today’s economy, there’s a whole lot of people who’d like to buy a house, a whole lot of student debt, and a whole lot of businesses struggling to find workers.
Lawmakers in Maine are considering knocking out all of those challenges in one legislative swoop. They want to attract young people to Maine by forgiving up to $40,000 in student-loan debt for first-time homebuyers.
Maine Senate President Troy Jackson told Insider that Maine had “a real challenge of filling the job market.” It’s become more of a retirement state, he said, without a lot of prime-age workers. At the same time, those younger workers might not have the ability to make a down payment on a first home or possess the financial record of a more experienced buyer.
The legislation would require the buyers to use their new homes as their primary residence for at least five years.
“A lot of people are trapped in debt. I believe very strongly that was by design,” Jackson said.
It’s one potential solution for lifting debt that may be keeping workers from taking the plunge to pursue a dream job, buy a house, or move to a new state. It may also help address the persistent issues that employers say they’re facing in hiring new workers.
“The housing market’s exploded. That’s pandemic-related for Maine, and our wage system in Maine is not right sized for the housing market right now,” Jackson said. “People talk about the American dream, and people talk about how they could do it before. No one’s seen this before.”
How it works
The Maine Smart Buy program would help first-time homebuyers in Maine with outstanding student debt to achieve homeownership, the Maine legislature said.
The program is similar to Illinois’ Smart Buy program. Participants must have a student-debt balance of between $5,000 and $40,000, and they would work with the state of Maine to pay off their student debt in full at the time of closing on the home. If the buyer chose to sell the home within five years of the purchase, a portion of the student-loan assistance must be repaid to the state.
“We’ll help you pay down your college debt, but you’re gonna commit to living in the state for five years,” Jackson said.
Participants must have a minimum credit score of 640 to be eligible, and their home purchases must be valued between $86,600 and $131,100, depending on family size and location. The bill is slated for more work sessions, and the Maine Senate is in session until April.
“I think this should be a priority for all of us,” Jackson said. “I would now hope that the business community, which runs many of my colleagues’ mindsets, would get involved in this because they’re screaming for the state to do something to help bring workforce to Maine.”
$1.7 trillion of student loans weigh on Americans
The $1.7 trillion student-debt crisis falling on 45 million Americans’ shoulders grows every day, and for many of those affected, the debt burden is shutting them out of buying a home. The Institute for College Access & Success ranks Maine as a high-debt state, with 2020 graduates holding an average of $32,764 in debt.
“Here in Maine, if you’ve gone to school to become a professional social worker, you’re going to be paying on your student debt for a long damn time because you don’t make a lot of money,” Jackson said. “But that’s a very worthy profession, and you shouldn’t be trapped in that. We need all kinds of professions.”
The National Association of Realtors found in a September poll that student debt caused 51% of borrowers to delay their home purchase — an issue Housing Secretary Marcia Fudge illuminated in July.
Fudge said at the time that there was a disproportionate rate of Black homeownership, and that the student-debt burden also disproportionately fell on Black borrowers.
“Who has student debt? Poor people, Black people, brown people,” Fudge told Axios. “We’re the people who carry the most debt. And so the system’s already skewed toward us not being creditworthy.”
It’s unclear how many people will use these programs, and if it will lift the debt burdens off millions of Americans. President Joe Biden has taken steps to act on the crisis by canceling debt for targeted groups of borrowers, such as those defrauded by for-profit schools. But when it comes to broad relief for every federal borrower, he’s been largely silent, and he’s facing pressure from his own party to implement that relief before student-loan payments resume on May 1.
“I would wish that the federal government would do more for people that are already trapped in it. As a state, we’re not gonna be able to fix everybody’s issue, unfortunately. I’d like to,” Jackson said. “Right now, I’m trying to make sure that people can get into the state or stay in the state. This is one way to do it.”