Montgomery County Council member Tom Hucker says a financial study of his effort to help ease the burden of student debt should start this summer, the next step in setting up a system that would let the county refinance residents’ college loans. The General Assembly passed legislation earlier this month enabling the county to set up its own loan authority, which would take advantage of the county government’s borrowing power to offer low interest rates.
Hucker said the idea for the authority came last year when the Montgomery County Education Association (MCEA) learned through a survey that half of its 800 members who responded had more than $40,000 each in student debt.
Hucker said he hopes the ability to refinance student loans at lower rates would make it easier for residents across the socioeconomic spectrum to buy homes in the county.
“More and more people are in their 40s before they can afford a house in Montgomery County because they’re paying their student loans,” Hucker said. “Homebuilders have told me that they’ve identified this gap for years in the home-purchasing market.
“You have poor, working class people who start school and then have to drop out,” he said. “You have lots of people that get their undergraduate degree and have to do a job that isn’t really advancing their career because they need to get their graduate degree and they may not have the income to do that, and still need to pay off their undergraduate loans.”
The loan authority is likely to be modeled after the Rhode Island Student Loan Authority and Hucker said he expects council and county staff to examine that state’s system in the financial study. That study will likely also include a look at the local demand for student loan refinancing. Hucker pointed to publicly available information on outstanding loans that can be examined at the census-tract level.
Hucker said that like the Rhode Island authority, he expects the county to use tax-free bonds to refinance the student loans of any county resident. In November, the U.S. Treasury Department issued guidance that said state governments could use the tax-exempt bonds to refinance student loans for anyone who lives or attended college in that state, even if the government wasn’t the original lender.
A state fiscal analysis of the enabling legislation predicted the county’s start-up costs and operating funding for the authority would be offset by repayments to the authority.
Hucker said he has asked council staff to begin drafting a bill to establish the authority. The council would have to appoint a five-member board to run the agency.
