As millions of Americans continue to struggle with $ 1.7 trillion in outstanding student loan debt, at least one state with a shrinking population has come up with a solution to attract new residents: offer to pay back its student loans.
Illinois “SmartBuy”The program does just that and can repay up to $ 40,000 in student loans to borrowers who buy a home there. Some studies have shown that borrowers who are struggling with student loan debt are much less likely to get a mortgage to buy a home.
This is how the program works:
- SmartBuy will repay student loans up to $ 40,000 or student loan balance 15% of the purchase price of the home – whichever is the lower.
- The program can also provide up to $ 5,000 in housing down payment or closing costs in addition to student loan assistance. Some FHA mortgages require a minimum down payment.
- Eligible prospective homeowners in the Chicago area must have a household income of $ 109,200 or less.
- There is a maximum home purchase price cap that ranges from $ 325,000 to over $ 500,000, depending on geographic location and other factors.
- It is important to note that partial payments are not allowed. The full balance of the student loan must be repaid by purchasing a home. But if the $ 40,000 does not cover the full repayment, the borrowers can repay the remaining amount themselves with additional resources.
- Second homes are not eligible – the home must be the borrower’s primary residence and must have lived there for at least three years, or they may have to pay back some of the student loan assistance they received.
- Unlike other student loan mortgage assistance programs where student loans are simply wrapped with a mortgage (which the borrower then has to pay off), the SmartBuy program functions as an education loan forgiveness program. Every month you live in the home, 1/36 of the student loan aid is forgiven. After three years, the entire amount will be forgiven.
While this type of program is not a solution to the complex student loan crisis that is plaguing millions of Americans, it can provide real, meaningful assistance to borrowers who are struggling with student loan debt and as a result cannot buy a home.
Meanwhile, debate continues in Washington over the forgiveness of student loan benefits. Last week the Biden administration announced that attorneys, under the leadership of Education Minister Miguel Cardona, will examine potential legal bodies that could form the basis for widespread student loan forgiveness through enforcement action – something that President Biden has resisted, but has not completely withdrawn. The Department of Education will coordinate with the US Department of Justice, which is also exploring possible legal avenues for forgiving student loans using the executive branch.