As the average American college graduate continues to grapple with skyrocketing student debt, The Washington Post reports municipalities and states are beginning to look at ways to help graduates with their debt as a way to attract new talent.
The latest example is in Montgomery County, Maryland, where legislation is being considered that would allow the municipality to establish a loan authority and give the county the ability to leverage its municipal borrowing power to extend rock-bottom rates to its residents. It could be a way for the wealthy county to attract young, college-educated workers and entrepreneurs.
“If we’re able to say, ‘If you come to Montgomery County . . . we’ll help you refinance your student loans and lower your cost of living,’ that’s a very powerful, very attractive incentive,” says Montgomery County council member Tom Hucker. “It could help retain the graduates of our high schools that we’ve already invested in. We want them to stay here, start families and businesses, own houses.”
If the bill succeeds in the next legislative session, Montgomery would join a growing list of states stepping into the student loan market to ease the debt burden on residents.
Minnesota, Maine, North Dakota, California and Connecticut have passed legislation that allows them to refinance student loans, while politicians in Virginia and Wisconsin are pressing for the same. Proponents say student debt has become a significant economic barrier, keeping people from full participation in the local economy.
States are in many cases reviving or using existing student loan authorities created decades ago to lend money and guarantee federally insured loans. These agencies can finance loans from the proceeds of tax-exempt bonds but can only use that tax-free revenue to lower the interest rate on loans they originated.
