Why This State Wants To Give You $40K To Pay Off Your Student Loan
Under the proposed “Smart Buy Program,” qualifying first-time homebuyers will be allowed to purchase a house in the state and have up to $40,000 in student debt forgiven through a state appropriation, according to the Maine State Housing Authority.
Here’s the catch: You would be required to maintain the home as your primary residence for at least five years. The student debt would be forgiven at the time of the home loan closing, but you would still be obligated by a promissory note equal to the amount of the student debt to be forgiven. The student debt would then be forgiven at a rate of 20% per year over five years, until you fulfill the five-year obligation.
If you leave or sell the home before the five-year period is over, you would be liable for the proportional amount of the second loan still owed.
“We’ll help you pay down your college debt, but you’re gonna commit to living in the state for five years,” Maine Senate President Troy Jackson told Business Insider.
Maine’s program is modeled after similar programs in Maryland and Illinois. It is designed to not only help people pay off student debt and purchase a home in a housing market where prices have been rising in double digits, but also to help Maine attract more workers.
The state has “a real challenge filling the job market,” Jackson said. That’s partly because Maine is attracting more retirees than young workers. The combination of student debt relief and access to a home purchase might be just the right tonic to lure more young people to the state, Jackson added.
Participants in Maine’s Smart Buy program must have a student-debt balance of between $5,000 and $40,000, Business Insider noted. You must also have a minimum credit score of 640 to be eligible, and your home purchase must be valued between $86,600 and $131,100, depending on your family size and location.
The bill is still being discussed in the Maine Senate, which is in session until April.
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