An Act To Authorize a General Fund Bond Issue To Provide for Student Loan Debt Relief
Maine Legislature, Session 129, LD 0394
Committee: Innovation, Development, Economic Advancement and Business
Sponsors: HOBBS, MIRAMANT, BABINE, HIGGINS, INGWERSEN, LANDRY, NADEAU
Amends: 36 MRSA §5122, 36 MRSA §5217-D

Legislative Document
No. 394
H.P. 303
House of Representatives, January 29, 2019
An Act To Authorize a General Fund Bond Issue To Provide for 
Student Loan Debt Relief
Reference to the Committee on Innovation, Development, Economic Advancement and 
Business suggested and ordered printed.
ROBERT B. HUNT
Clerk
Presented by Representative HOBBS of Wells.
Cosponsored by Senator MIRAMANT of Knox and
Representatives: BABINE of Scarborough, HIGGINS of Dover-Foxcroft, INGWERSEN of 
Arundel, LANDRY of Farmington, McCREIGHT of Harpswell, NADEAU of Winslow.
Preamble.  Two thirds of both Houses of the Legislature deeming it necessary in 
accordance with the Constitution of Maine, Article IX, Section 14 to authorize the 
issuance of bonds on behalf of the State of Maine to provide funds as described in this 
Act,
Be it enacted by the People of the State of Maine as follows:
PART A
Sec. A-1.  Authorization of bonds.  The Treasurer of State is authorized, under 
the direction of the Governor, to issue bonds in the name and on behalf of the State in an 
amount not exceeding $50,000,000 for the purposes described in section 5 of this Part.  
The bonds are a pledge of the full faith and credit of the State.  The bonds may not run for 
a period longer than 10 years from the date of the original issue of the bonds.
Sec. A-2.  Records of bonds issued; Treasurer of State. The Treasurer of 
State shall ensure that an account of each bond is kept showing the number of the bond, 
the name of the successful bidder to whom sold, the amount received for the bond, the 
date of sale and the date when payable.
Sec. A-3.  Sale; how negotiated; proceeds appropriated.  The Treasurer of 
State may negotiate the sale of the bonds by direction of the Governor, but no bond may 
be loaned, pledged or hypothecated on behalf of the State.  The proceeds of the sale of the 
bonds, which must be held by the Treasurer of State and paid by the Treasurer of State 
upon warrants drawn by the State Controller, are appropriated solely for the purposes set 
forth in this Part.  Any unencumbered balances remaining at the completion of the project 
in this Part lapse to the Office of the Treasurer of State to be used for the retirement of 
general obligation bonds.
Sec. A-4.  Interest and debt retirement.  The Treasurer of State shall pay 
interest due or accruing on any bonds issued under this Part and all sums coming due for 
payment of bonds at maturity.
Sec. A-5.  Disbursement of bond proceeds from General Fund bond issue.  
The proceeds of the sale of the bonds authorized under this Part must be expended as 
designated in the following schedule under the direction and supervision of the agencies 
and entities set forth in this section.
Provides funds for low-interest student loans and interest rate reductions for student 
loan consolidation or refinancing for certain Maine residents who agree to live and 
work in Maine for at least 5 years.
FINANCE AUTHORITY OF MAINE
Maine Student Loan Debt Relief 
Program
Sec. A-6.  Contingent upon ratification of bond issue.  Sections 1 to 5 do not 
become effective unless the people of the State ratify the issuance of the bonds as set 
forth in this Part.
Sec. A-7.  Appropriation balances at year-end.  At the end of each fiscal year, 
all unencumbered appropriation balances representing state money carry forward.  Bond 
proceeds that have not been expended within 10 years after the date of the sale of the 
bonds lapse to the Office of the Treasurer of State to be used for the retirement of general 
obligation bonds.
Sec. A-8.  Bonds authorized but not issued.  Any bonds authorized but not 
issued within 5 years of ratification of this Part are deauthorized and may not be issued, 
except that the Legislature may, within one year after the expiration of that 5-year period, 
extend the period for issuing any remaining unissued bonds for an additional amount of 
time not to exceed 5 years.
Sec. A-9.  Referendum for ratification; submission at election; form of 
question; effective date.  This Part must be submitted to the legal voters of the State at 
a statewide election held in the month of November following passage of this Act.  The 
municipal officers of this State shall notify the inhabitants of their respective cities, towns 
and plantations to meet, in the manner prescribed by law for holding a statewide election, 
to vote on the acceptance or rejection of this Part by voting on the following question:
"Do you favor a $50,000,000 bond issue to provide funds for low-interest 
student loans and interest rate reductions for student loan consolidation 
or refinancing for certain Maine residents who agree to live and work in 
Maine for at least 5 years?"
The legal voters of each city, town and plantation shall vote by ballot on this question 
and designate their choice by a cross or check mark placed within a corresponding square 
below the word "Yes" or "No."  The ballots must be received, sorted, counted and 
declared in open ward, town and plantation meetings and returns made to the Secretary of 
State in the same manner as votes for members of the Legislature.  The Governor shall 
review the returns.  If a majority of the legal votes are cast in favor of this Part, the 
Governor shall proclaim the result without delay and this Part becomes effective 30 days 
after the date of the proclamation.
The Secretary of State shall prepare and furnish to each city, town and plantation all 
ballots, returns and copies of this Part necessary to carry out the purposes of this 
referendum.
PART B
Sec. B-1.  20-A MRSA c. 441 is enacted to read:
Total
$50,000,000
CHAPTER 441
MAINE STUDENT LOAN DEBT RELIEF PROGRAM
§12941.  Definitions
As used in this chapter, unless the context otherwise indicates, the following terms 
have the following meanings.
1.  Authority.  "Authority" means the Finance Authority of Maine.
2.  Fund.  "Fund" means the Maine Student Loan Debt Relief Fund established in 
section 12943.
3.  Program.  "Program" means the Maine Student Loan Debt Relief Program 
established in section 12942. 
4.  Qualified institution of higher education.  "Qualified institution of higher 
education" means an accredited institution of higher education eligible to receive federal 
assistance under a federal student assistance program authorized under the federal Higher 
Education Act of 1965, 20 United States Code, Chapter 28, Title IV. 
5.  Student.  For purposes of participation in the loan component of the program, 
"student" means an undergraduate or graduate student who is a resident of the State, is 
enrolled at an in-state qualified institution of higher education and has been selected by 
the authority to receive a loan. "Student" includes a high school senior who is committed 
to study at an in-state qualified institution of higher education and has been selected by 
the authority to receive a loan. For purposes of participation in the loan consolidation or 
refinancing interest rate reduction component of the program, "student" means a resident 
of the State who has incurred student debt as a result of study at any in-state or out-of-
state qualified institution of higher education and has been selected by the authority to 
participate in the loan consolidation or refinancing interest rate reduction component of 
the program.
§12942.  Maine Student Loan Debt Relief Program
1.  Program established; loans. The Maine Student Loan Debt Relief Program is 
established to increase the number of individuals in the State pursuing undergraduate and 
graduate degrees and to encourage them to subsequently reside and work in the State. The 
authority shall provide loans in amounts up to $10,000 per year for a maximum of 5 years 
to selected students. 
A.  A student may receive a loan bearing an annual interest rate of 0% if the student 
studies at an in-state qualified institution of higher education and upon graduation 
with an undergraduate or graduate degree agrees to:
(1)  Remain in the State as a resident; and
(2)  Be employed in the State for a period of at least 5 years following 
graduation.
A student may continue to receive a loan bearing an annual interest rate of 0% 
beyond the expiration of the 5-year period for as long as the student continues to 
reside and work in the State.
B.  A student may receive a loan bearing an annual interest rate of the prime rate of 
interest, as determined by the authority, plus 2% if the student does not remain in the 
State, either as a student or as an employee, to reside and work for a minimum of 5 
years or does not thereafter continue to reside and work in the State.
2.  Consolidated or refinanced loan rate reduction.  The authority may use 
program funds to reduce interest rates on consolidated or refinanced loans to students 
made by participating lenders through the Higher Education Loan and Loan Insurance 
Program set forth in chapter 417-C and administered by the authority.  Interest rate 
reduction payments may be made to or on behalf of students who reside and work in the 
State for a minimum of 5 years following the entering into of the applicable agreement 
with the authority and as long thereafter as the student continues to reside and work in the 
State.
3.  Participation.  An individual may participate in the loan component of the 
program for in-school students or the loan consolidation or refinancing interest rate 
reduction component of the program for an individual no longer in school or both.
4.  Program administration; rules. The authority shall administer the program and 
may adopt rules to carry out the purposes of the program. Rules adopted pursuant to this 
subsection are routine technical rules pursuant to Title 5, chapter 375, subchapter 2-A.
§12943.  Maine Student Loan Debt Relief Fund
1.  Fund established.  The Maine Student Loan Debt Relief Fund is created as a 
nonlapsing, interest-earning, revolving fund to carry out the purposes of this chapter.
2.  Funds.  The authority may receive, invest and expend on behalf of the fund 
money from gifts, grants, bequests and donations in addition to money appropriated or 
allocated by the Legislature to the fund and any federal funds received by the State for the 
benefit of students in the State who have outstanding education loans. Money received by 
the authority on behalf of the fund must be used for the purposes of this chapter. The fund 
and any earnings of the fund may be used for the designated purpose or to pay 
administrative costs incurred by the authority in administering the program, as 
determined appropriate by the authority. Any unexpended balance in the fund carries 
forward for continued use under this chapter.
§12944.  Agreement; repayment
A student applying for a loan or for an interest rate reduction under section 12942 
shall enter into an agreement with the authority that includes the following provisions.
1.  Loans.  For a loan recipient under the loan component of the program, upon 
completion of postsecondary education, the recipient shall repay the entire principal of 
the loan plus simple interest, if any, as described in section 12942, subsection 1.  Interest 
does not begin to accrue until 6 months following completion of the loan recipient's 
education, withdrawal from school or discontinuance in school. Loans must be repaid 
over a term no longer than 10 years, except that the authority may extend a loan 
recipient's term as necessary to ensure repayment of the loan.
2.  Rate reductions.  Loan terms and conditions on consolidated or refinanced loans 
under the program must be as determined by participating lenders and the students.  A 
recipient of an interest rate reduction under the loan consolidation or refinancing interest 
rate reduction component of the program shall enter into an interest rate reduction 
agreement with the authority. The agreement must provide that the authority will make 
interest rate reduction payments to the lender or the student, at the discretion of the 
authority, for the term of the loan, as long as the student resides and works in the State for 
a minimum of 5 years and the loan is not in default.  The agreement also must provide 
that these payments may not be made for a term exceeding 15 years.
§12945.  Default
1.  Loans.  If a loan recipient under the loan component of the program does not 
remain residing and working in the State for a minimum of 5 years, the interest rate on 
the loan held by that recipient is subject to change retroactive to the date of loan 
origination in accordance with the interest rate set forth in section 12942 and that 
recipient shall pay the authority the interest rate differential within 90 days. If a recipient 
no longer resides and works in the State after the initial 5-year period, that recipient's 
interest rate converts, effective on the date the recipient no longer resides and works in 
the State, to the higher rate set forth in section 12942, subsection 1. 
2.  Rate reductions.  If a recipient of an interest rate reduction under the loan 
consolidation or refinancing interest rate reduction component of the program does not 
remain residing and working in the State for a minimum of 5 years, all rate reduction 
payments made by the authority must be repaid by that recipient within 90 days.  If a 
recipient no longer resides and works in the State after the initial 5-year period, that 
recipient's interest rate reduction payments cease, effective on the date the recipient no 
longer resides and works in the State.
A recipient of a loan or an interest rate reduction who fails to repay the interest rate 
differential or interest rate reduction payments as required is liable to the authority for 
such amounts, plus interest on those amounts at the highest interest rate set forth in 
section 12942, subsection 1, plus costs of collection and the authority's attorney's fees. 
Exceptions may be made by the authority at its own discretion.
Sec. B-2.  Contingent effective date.  This Part takes effect only if the General 
Fund bond issue proposed in Part A is approved by the voters of this State.
PART C
Sec. C-1.  36 MRSA §5122, sub-§2, ¶QQ is enacted to read:
QQ.  To the extent included in federal adjusted gross income, student loan or interest 
rate reduction payments made by the Finance Authority of Maine in accordance with 
the Maine Student Loan Debt Relief Program under Title 20-A, chapter 441.
Sec. C-2.  36 MRSA §5217-D, sub-§2-A, as enacted by PL 2015, c. 267, Pt. 
QQQ, §5 and affected by §6, is repealed and the following enacted in its place:
2-A.  Limitations.  The following limitations apply.
A.  A credit claimed by a qualified individual based on eligibility under subsection 1, 
paragraph G, subparagraph (1), division (b) or (c) may be claimed only on returns 
filed for tax years beginning on or after January 1, 2016.  A credit based on loan 
payments made prior to January 1, 2016 is not available to any individual based on 
eligibility under subsection 1, paragraph G, subparagraph (1), division (b) or (c).
B.  An individual who received student loan debt relief during the taxable year 
through student loans or interest rate reduction payments made under the Maine 
Student Loan Debt Relief Program pursuant to Title 20-A, chapter 441 does not 
qualify for the credit under this section.
Sec. C-3.  Contingent effective date.  This Part takes effect only if the General 
Fund bond issue proposed in Part A is approved by the voters of this State.
SUMMARY
The funds provided by this bond issue, in the amount of $50,000,000, will be used to 
provide funds to the Finance Authority of Maine for zero-interest student loans and loan 
consolidation or refinancing interest rate reductions for certain Maine residents who agree 
to live and work in Maine for at least 5 years. The bill creates the Maine Student Loan 
Debt Relief Program. Under the program, zero-interest loans up to $10,000 per year for a 
maximum of 5 years are available to certain Maine residents who study at qualified in-
state institutions of higher education and agree to live and work in Maine for at least 5 
years following graduation. Loans bearing an annual interest rate of the prime rate of 
interest plus 2% are available to those who do not live and work in the State upon 
graduation.  The Finance Authority of Maine may provide interest rate reduction 
payments to residents who use the authority's existing loan consolidation and refinancing 
program. This option is available to individuals who studied in Maine or outside of Maine 
and agree to live and work in Maine for at least 5 years. The bill exempts from Maine 
income tax any benefits received under the program to the extent included in federal 
adjusted gross income and prohibits individuals who have received benefits under the 
program from receiving the Maine educational opportunity tax credit.