Peter Maloney wanted to move back to the Chicago area from Florida, but with $44,000 in student loans to repay he figured it would be several years before he could buy a home.
Maloney, 26, considered moving to Indiana, where he would be close to family and homes are less expensive. But he and his fiancee were sold on Illinois after learning about a state program that helps homebuyers pay off student loans and provides down payment assistance.
In June, Maloney will close on the purchase of a two-bedroom, two-bath condominium in Plainfield, Ill. “It definitely made the decision (to move) easier, and buying a home possible,” he said.
The SmartBuy program, offered by the Illinois Housing Development Authority, has drawn interest from other out-of-state buyers too, said Executive Director Kristin Faust.
The agency hopes the program, which began in December, will help remove one financial barrier to homeownership and make access more equitable.
The program will pay off up to $40,000 in student loans, or a loan amount equal to 15% of the home purchase price, whichever is lower. It will also provide a $5,000 loan toward a down payment or closing costs.
The state allocated up to $25 million to the program in Gov. J.B. Pritzker’s 2019 Rebuild Illinois capital plan. The money is expected to serve between 600 and 1,000 homebuyers.
To date, the agency has paid off an average of $24,100 in student loan debt for each buyer.
The program comes with other caveats. A buyer’s full outstanding student debt must be paid off during the home purchase. The home must be the buyer’s primary residence, and if they sell within three years they must repay a portion of the student loan assistance and sell to someone who meets the program’s income requirements. The sales price cannot exceed the program’s limits.
Buyers can apply for the program through one of about three dozen lenders that have partnered with the state. The Illinois Housing Development Authority sets the interest rate on the mortgage.
Nearly 200 buyers entered the SmartBuy process between Dec. 1 and late March, and 26 had completed purchases, according to the agency. About 10 of those who had entered the process were from outside Illinois.
Student loans delay first-time buyers from purchasing a home by about seven years, and current owners from buying their next home by about three years, according to a 2017 study from the National Association of Realtors.
The delays could add up in Illinois. More than 2 million residents have student loan debt, with an average balance of nearly $30,000, according to the state treasurer’s office.
Owning a home is a key way to build wealth and pass it from one generation to the next, so delays in purchasing a home ripple through the economy and individual households, Faust said.
“I think as a society we’ve said if you go to college and you do well and you graduate and you get a job, you should be able to buy a house,” she said. “And then instead we’ve saddled this generation with a lot of student debt.”