The state Senate voted 20-13 Tuesday in favor of a program that would forgive up to $40,000 in student loan debt for some first-time home buyers.

The $10 million Maine Smart Buy program from MaineHousing would be available to income-qualified first-time buyers who agree to live in the home for at least five years. Eligibility is open to students in any field of study, and graduation is not required to apply.

“Too many of our young people who have worked hard to pursue their chosen profession – professions we desperately need – are saddled with high levels of student debt,” said Sen. Chip Curry, D-Waldo. “This prevents them from purchasing their first homes and often forces them to leave Maine.”

The loan program that would be created by L.D. 1978 is the result of a legislative resolve that tasked MaineHousing with building a program that would help keep young Maine residents from leaving the state upon graduation. It is based on a Maryland program so successful it has been reauthorized twice, Waldo said.

In Maine, the average student graduates with $33,500 in student debt. This debt is crippling over 178,000 Maine residents, or 13.3 percent of the state population. And it makes it virtually impossible to buy a home in Maine, where the statewide median sales price hit $299,000 in December.

The bill enjoys the support of legislative leaders such as Senate President Troy Jackson, D-Allagash.

“The situation with student debt is dire,” Jackson said when testifying in favor of the bill last month before the Joint Standing Committee on Innovation, Development, Economic Advancement and Business. “With student loans, car payments, rent, utilities and other basic expenses, it is hard enough to make ends meet, let alone purchase a home.”

Despite Jackson’s support, the bill only narrowly won committee approval on a 7-6 vote this month.

“We’re counting on young people to fill workforce shortages, keep our heritage industries going and lead our state into the future,” Jackson said. “With this program, we can make it easier for young people to create a meaningful and fulfilling life here.”

Sen. Matt Pouliot, R-Augusta, spoke against the bill Tuesday even though he is a realtor and sponsored a separate bill approved by the Senate earlier in the day that would overhaul the Maine Opportunity Tax Credit to help reduce student loan debt for Mainers.

“You’d think I’d be in strong support of this,” Pouliot said. “I think the intent behind this or the idea is a really good one: to help Maine people get into homes, particularly those who have student loan debt. But the reality is that we have a supply side-issue in this state.”

Pouliot said Maine would be better off using the $10 million earmarked for this program to fund initiatives that would help build more housing for all Mainers, such as those to recruit young people to enter the building trades, for example.

MaineHousing is worried about money, too – about how much is available, not how it should be spent.

Demand for the debt-forgiveness program could far exceed the $10 million in available funding, especially given the large debt load carried by today’s college graduates. The bill could lead to giving a substantial public benefit to a small group of households, a MaineHousing lobbyist told the innovation committee.

The bill now heads to the House for consideration.

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