Why This State Wants To Give You $40K To Pay Off Your Student Loan

South Portland, Maine, USA with the Portland Breakwater Light at dawn.
Sean Pavone / Getty Images/iStockphoto

Lawmakers in Maine want to help you pay off your student debt — and buy a home — while also luring more young folks to the state as a way of addressing its labor shortage problem.

See: Student Loan Payments Restart in May — Here’s How You Can Prepare
Find: How Gen Z Plans To Avoid Student Loans

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.

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“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.

Find Out: Will Student Loans Become More Expensive When the Fed Raises Interest Rates?
Read More: 10 Ways To Pay Off Your Student Loans in One Year

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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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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