With millions of Americans still grappling with $ 1.7 trillion in outstanding student loan debt, at least one declining state has found a solution to attracting new residents: offering to repay their student loans.
Illinois “Smart buyThe program does just that and can repay up to $ 40,000 in student loans for borrowers buying a home there. Some studies have shown that borrowers struggling with student loan debt are far less likely to be able to take out a mortgage to buy a home.
This is how the program works:
- SmartBuy pays out up to $ 40,000 in student loans or a student loan portfolio equal to 15% of the home purchase price, whichever is lower.
- In addition to student loan support, the program may provide up to $ 5,000 for a down payment or home graduation fee. Some FHA mortgages require minimal down payments.
- Eligible potential homeowners in the Chicago area must have a household income of no more than $ 109,200.
- There is a cap on the purchase price of the home that ranges from $ 325,000 to more than $ 500,000 depending on geographic location and other factors.
- It is important that partial payments are not permitted. The borrower’s entire student loan amount must be repaid by purchasing the home. However, if the $ 40,000 does not cover the full payout, borrowers can use additional resources to pay off the remaining balance on their own.
- Second homes are not eligible for the program – the home must be the borrower’s primary residence and live there for at least three years, or they may need to repay some of the student loan repayment assistance received.
- Unlike other student mortgage loan support programs where the student loan is only wrapped in the mortgage (which the borrower then has to repay), the SmartBuy program acts as a student loan allocation program. Every month that you live at home, 1/36 of the student loan support amount is given. The full amount is awarded after three years.
While this type of program does not provide a solution to the complex student loan crisis afflicting millions of Americans, it can provide real and meaningful help to borrowers struggling with student loan debt and unable to buy a home.
Meanwhile, in Washington, the debate on large-scale student loan forgiveness continues. Last week the Biden administration did announced that lawyers under Education Minister Miguel Cardona will investigate potential legal authorities that could provide the basis for widespread student loan forgiveness that is being implemented through executive action – something President Biden has opposed but not completely taken off the table . The Department of Education will coordinate its efforts with the US Department of Justice, which is also reviewing possible legal options for obtaining student loans using executive power.