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Minnesota can solve the student loan problem for our residents, at little cost to the state.

Student loan debt is a problem. It is a dagger hanging over the lives of a lot of people. They played by the rules and went to school and took out debt to pay for it because we told them that the way to get ahead in life and make more money is to get an education. But it has not paid off for everyone and for some the decision to take out student loans threatens to ruin their lives. We can rescue them and we should.

My proposal is that the state of Minnesota buy the student loans, whether public or private, of every resident of Minnesota (after you have been here for 6 months maybe and with a pledge that you intend to stay in the state for at least 12 more months). The state would then step in as the lender. We would charge a fair interest rate that for almost all borrowers would be less than they were paying. The state can borrow at less than 2% and then lend at 4% or less and make money while charging student loan borrowers a lower interest rate than they were paying. If you leave the state, we would increase your interest rate by maybe ½ of 1%. Borrowers would be required to pay no more than 15% of their income for no more than 15 years. At the end of 15 years, if you still have a balance, we would forgive it.

On those terms, over 90% of borrowers would be able to pay their loans in full, and the profit the state would make on borrowing at 2% and lending at 4% would roughly cover any losses from defaults and forgiven debt. So this would cost the state almost nothing, but for some student loan borrowers it would be life changing. It would guarantee that your life is not ruined by student loan debt.

Even for those who wind up paying their loans in full, it would improve their lives because it would be very reassuring to know that if you lose your job or your income you would not go into default on the debt because you would never have to pay more than 15% of your income.

It would also improve our economy and our cultural environment by attracting educated young people to stay in Minnesota or move here.

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