Maine lawmakers are considering a measure that would ask voters to approve a $250 million bond issue to ease student debt.
The proposal would use the borrowed money to forgive loans of up to $10,000 for graduates who stay and work in Maine for five years.
Sen. Nate Libby, a Lewiston Democrat, made a case for his bill at a public hearing before the legislature’s Innovation, Development, Economic Advancement and Business Committee.
“The average student loan debt for recent graduates in Maine is nearly $30,000,” says Libby. “That is the fifteenth-highest rate in the nation. About ten percent of student loan borrowers in Maine are defaulting on their loans. The borrowers who are staying on track to pay their loans are doing so by not fully-participating in the economy.”
Libby says he believes that by reducing the debt burden, those graduates with large student loans will be more fully able to participate in the economy by buying homes, buying reliable vehicles or by getting married and having children.
Among those who testified in support were several people who say that they are still paying on their student own loans and their children are ready to start college.
Sara Leighton of Dresden told the Committee that interest rates on these loans are too high.
“My government student loans have a 6.8 percent interest rate, which makes paying down these loans nearly impossible,” Leighton says. “Of the $30,000 that I have paid, $18,000 or sixty percent has gone directly to interest.”
Committee members have expressed concerns about the tax implications of the proposal. If a debt is forgiven, both the IRS and Maine Revenue Services treat that as income and tax it. Some on the Committee have suggested adding a provision that would not levy a tax at the state level.
Jodi LaSalle of Corinth told the panel that she would like to see the cost and benefits from this proposal, and all bonds, spelled out clearly on the ballot, because that $250 million plus interest has to be paid back through taxes.
“This is what it will do, it will take 25,000 people and pay off $10,000 worth of their debt, but this is the tax increase, this is the dollar amount that everyone, including them, are going to pay,” says LaSalle.
The bond measure is one of the largest now under consideration in Augusta. In all there are nearly $2 billion worth of borrowing proposals before the legislature.
Gov. Janet Mills has proposed enough money in her two-year budget to pay the debt service for just $200 million in borrowing, so any more bonding would require additional appropriations from a budget that is already being scrutinized as too large.