AUGUSTA — Lawmakers are once again exploring avenues to use student loan forgiveness and zero-interest loan programs as a way to simultaneously address a growing student debt problem and statewide worker shortages.
For the past decade, Maine has offered a tax credit program – known as Opportunity Maine – that allows college graduates who live and work in Maine to earn a credit on their income taxes for student loan payments. But despite bipartisan efforts, Maine lawmakers have not passed more sweeping debt relief programs in recent years.
One of the most ambitious proposals under consideration this year would ask voters to approve a $250 million bond issue to finance a program that would provide up to $10,000 in debt repayment for grads who agree to live and work in Maine for at least five years. Companies that pay debts on behalf of their employees also would be eligible for repayments.
Emma Burke, a state employee who accrued roughly $60,000 in loan debts while earning her undergraduate and graduate degrees, said the proposal would be a first step in Maine and nationally in response to a lack of federal action to address student loan burdens.
“For most Mainers, it is either a choice of taking out loans or not going to college,” Burke told members of the Legislature’s Innovation, Development, Economic Advancement and Business Committee. “We are then left with loans and interest rates so egregiously high that we have to move out of state or live on the outskirts of the traditional economy for 20- and 30-somethings. I turned 29 last week and I cannot fathom how I can ever buy a house.”
Nationwide, Americans owe more money in student loans than every other form of debt with the exception of mortgages. The credit agency Experian said student loan debt has doubled over the past decade and hit a record $1.4 trillion last year.
Bill sponsor Sen. Nathan Libby, D-Lewiston, pointed out that Maine’s average student loan debt of $30,000 is the 15th-highest in the nation and that 10 percent of borrowers default on their loans. Those debts drive many college grads to seek better-paying jobs in other states and, among those who stay, prevent them from buying homes or saving for retirement, he said.
The $10,000 in forgiven loans is roughly equivalent to how much income tax a college graduate would be expected to pay over that five-year period, Libby said.
Libby’s bill, L.D. 149, would allow loan forgiveness for debts accrued in pursuing either undergraduate or graduate degrees and would not restrict participation to college graduates with certain degrees or working in specific fields.
“We need workers, and we need workers in every industry,” said Libby, the Senate majority leader.
Other bills propose alternative ways to address the issue. L.D. 394, for instance, proposes a $50 million bond measure to offer zero-interest student loans as well as loan consolidation and refinancing programs. Another bill, L.D. 461, would expand grant programs to help low-income Mainers pay for college.
All of those bills would house the programs within the Finance Authority of Maine, which already works with private employers on the Opportunity Maine Tax Credit program, as well as banks on low-interest loans.
FAME representative Bill Norbert pointed out that his quasi-independent state agency worked with former Gov. Paul LePage, Libby and other lawmakers on similar proposals in past years. LePage had proposed a $50 million bond measure for zero-interest loans last year as well as a $100 million bond for a student loan repayment program in 2017 but neither passed the Legislature.
“We are happy to be a tool in helping to administer this program,” Norbert said.
Committee members heard emotional stories from several borrowers.
Matthew Shaw of Lewiston said he has used Opportunity Maine’s non-refundable tax credits but that is not enough. Shaw accrued roughly $100,000 in debt before receiving his undergraduate degree in 2010 and now works a full-time job plus two part-time jobs to help cover payments in excess of $1,000 a month.
Shaw said he could earn more in other states, but that he wants to stay in his native Maine.
“I stand here in front of you in support of L.D. 149 because I 100 percent believe it is needed to help others like me choose to live, work and build their roots here in our great state,” Shaw said. “It will help recruit educated and skilled laborers for our workforce, provide a solution and combat the state’s aging and retiring workforce.”
Ryan LaRochelle, a lecturer at the University of Maine in Orono, pointed out that the average amount of student debt for graduates of Maine’s flagship public university was $34,000 in 2017.
“Students quickly realize that they probably cannot earn enough in Maine to pay down their debt, so they move elsewhere, creating a devastating brain drain,” said LaRochelle, who is still paying off $40,000 in debt accrued while earning his undergraduate degree. “This bond proposal will make Maine attractive to young people.”
Libby’s $250 million bond proposal will certainly face challenges with his legislative colleagues, however. There is stiff competition for the relatively limited amount of general obligation bonds sent to the voters, and lawmakers typically delay decisions on state borrowing until after completing work on a two-year budget.
The estimated interest on Libby’s $250 million bond proposal is $65 million, raising the total cost for his initiative to $315 million.
Several speakers urged lawmakers not to increase the tax burden of all Mainers – most of whom have their own mortgages and other bills – by borrowing large sums of money to help college graduates pay off their debts.
“We do need to remember that at the end of the day, somebody pays,” said Rep. Susan Austin, R-Gray. “We need to find some balance to that.”
The committee will hold a work session on the bills at a future meeting.
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