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Md. lawmakers want to study student loan relief

Lawmakers in Annapolis want to explore new ways to reduce the student loan burden of Maryland residents – including creating a state body to refinance student loans.

A bill calling for a study of the issue – including whether any state agency has or could be given the bonding authority to refinance loans – is expected to move forward in the House of Delegates this week.

“College tuition has gotten out of hand for working- and middle-class families,” House Speaker Michael E. Busch, a sponsor of the measure, told The Daily Record. “People have saved all their lives to send their kids to school and now they can’t afford to do it.”

The nonprofit Institute for College Access & Success reports that of the 2014 graduates of nonprofit, four-year institutions in Maryland, 58 percent had student debt, owing an average of $27,457.

Debt reported by new Maryland graduates has increased 118 percent from 2004 to 2014, according to the institute.

But Maryland may be able to make tuition more affordable by sharing the cost with students, Busch said.

States including Connecticut, Rhode Island and Minnesota have been in the business of offering low-interest student loans for decades, and they recently built on those programs by adding refinancing options.

The Connecticut Higher Education Supplemental Loan Authority, or CHESLA, sold bonds in 2015 which allowed it to offer new loans with a 4.95 percent interest rate, the lowest in the authority’s 30-year history, according to its most recent annual report.

Rhode Island has been offering new student loans for more than 35 years and has earned a triple-A bond rating from Fitch Ratings and Standard & Poor’s, according to that organization’s 2015 annual report.

In the first year and a half of offering refinancing services, the Rhode Island authority helped 349 people refinance $13.6 million in student debt at interest rates as low as 4.24 percent, according to the annual report.

But these authorities aren’t for everyone: Rhode Island requires borrowers to pass a credit check and make at least $40,000 per year to qualify for refinancing; Minnesota requires borrowers to have FICO credit scores of at least 720 (650 if the borrower has a co-signer), and no delinquencies on their credit reports.

Connecticut and Minnesota’s refinancing programs are launching this year.

Busch said a Maryland program might also need to be targeted at borrowers of certain income levels.

The study bill tasks the Maryland Higher Education Commission and the Maryland Health and Higher Educational Facilities Authority with examining the possibility of creating similar programs and reporting back to the General Assembly in September 2017.

A pair of local bills submitted this year sought to authorize the creation of local student loan refinancing authorities in Montgomery and Harford Counties, but the fate of those bills has yet to be determined.

The Montgomery County bill drew staunch opposition from County Executive Isiah Leggett, who doesn’t think that the county will have the money to create and support such a body in the foreseeable future and doesn’t want to raise false expectations.

Leggett believes that financing the initiative in a way that can provide low-interest loans comes with “significant risks and uncertainties,” according to written testimony submitted by the county.

In a Jan. 28 letter to Leggett, the county’s finance director, Joseph F. Beach, cautioned that a county authority could face start-up costs of $50 million to $100 million and that the authority might struggle to be able to provide interest rates lower than the federal government. A county authority would also lack an existing portfolio to help collateralize existing loans.

Montgomery County’s House delegation altered the bill to require a feasibility study. The amended version earned the support of the county council.

“We turned it into a study bill when we realized … how complex the issue is,” said House Majority Leader Anne Kaiser, D-Montgomery, the bill’s lead sponsor. “I certainly understand the county executive’s concern about affordability, but, at the same time, it is just a study.”

Kaiser said Tuesday it wasn’t clear whether the Montgomery bill and the Harford bill – sponsored by Del. Mary Ann Lisanti, a Democrat – would move forward.