Got student debt? Move fast, and some cities will help you pay it off.
Some cities and counties looking to revitalize offer an incentive – help repaying student loans – to college grads who agree to relocate to their borders. Can it be a win-win for grads and struggling communities?
Washington — College graduates steeped in debt have an unexpected ally to combat their student loans: local governments.
In coming months, Niagara Falls, N.Y., will strive to lure young professionals to its languishing downtown by offering to help pay their student loans. In rural Kansas, income tax waivers and student loan repayments are being marketed to entice college graduates. And Nebraska, heeding Kansas’s blueprint, may consider a similar relocation proposal in its 2012 legislative session.
The efforts are part of a small but growing trend among rural and Rust Belt cities to try to attract educated young people – a reflection of research that indicates they are often the best way to revitalize a depressed area. Since the last third to half of the 20th century, population growth in rural places has been eclipsed by urban centers, says Brett Theodos, a research associate at The Urban Institute, a nonpartisan think tank based in Washington.
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“These communities are eager and desperate to attract and retain people,” Mr. Theodos says. “They also don’t have a lot of resources to throw at the problem, so they need to shepherd their investments wisely.”
In Niagara Falls, city officials marshaled $200,000 to fund the new student loan incentive. Community development director Seth Piccirillo says the idea was born out of the realization that many college graduates nationwide are bogged down by debt – and are needed to give the town an economic make-over.
The city’s once industrial-centered economy is now a shadow of its former self and its population has plummeted from 100,000 to 50,000 over 50 years. If the next census reveals any fewer residents, city leaders worry that they may lose some forms of federal assistance.
“We know that we need these young professionals in Niagara Falls to compete in the future,” Mr. Piccirillo says. “At the same time, we know that these college graduates are starting off with this debt in a difficult economy. We wanted to figure out a program that would benefit both.”
The result is an initiative that will guarantee $7,000 over two years to 20 graduates of any higher-education institute. Though the first batch of applications won’t be released for a couple of months, Piccirillo says he’s already seen interest judging from the 200-plus e-mails and phone inquiries he’s received – many from Western and Southern states.
If approved for the program, applicants are required to rent an apartment or buy a home within a specific downtown area. The ultimate goal, Piccirillo says, is homeownership at the end of two years – even if for just six or seven of the newcomers.
“We’re not trying to do something citywide,” Piccirillo says. “We realize that resources are limited, so if you really try to do stabilization neighborhood by neighborhood, that’s the wisest way in today’s economy.”
By contrast, the Kansas program, launched in July 2011, was designed for specific counties. Fifty are designated as Rural Opportunity Zones (ROZs), which offer Kansans income tax waivers for up to five years and/or student loan repayments of up to $15,000.
Chris Harris, who runs the program, says he has received 389 applications to date. Of those, he estimates about 75 percent will qualify for one or both of the incentives, which are jointly funded by the state government and participating counties. In October, the first round of payments will be distributed to 160 residents, many of whom have ties to the region.
“Given that there wasn’t something else to model this program after, I would say we’re very encouraged by what we’ve seen,” Mr. Harris says.
To qualify for loan repayments, applicants must have earned an associate’s, bachelor’s, or postgraduate degree; carry an outstanding student loan balance; and lived in an ROZ county since July 1, 2011.
To earn Kansas income tax waivers, applicants must have claimed residency in a ROZ county on or after July 1, 2011, and have lived outside Kansas for at least five years prior. Additionally, they cannot have earned more than $10,000 from a Kansas employer in those five years.
Harris says 75 percent of applicants are seeking employment in the health-care, education, finance, or legal sectors. Interest in manufacturing, engineering, and agriculture areas is also common, he says.
“There are opportunities in those sectors in practically every part of the state,” he says. “If a person had the expectation that there weren’t opportunities in these regions, they’d be surprised if they were to look into them.”
Areas with high unemployment in Kansas don’t suffer from a lack of jobs but rather from finding people to hold those positions, he adds.
It’s not only local governments that are spearheading ways to attract young adults, though. In Detroit, organizations have committed to revitalizing the downtown area. One is the Hudson Webber Foundation, which aims to attract 15,000 young adults to the city by 2015. Dubbed the "15 by 15" initiative, a patchwork of nonprofits, philanthropists, and business executives is pioneering efforts ranging from creating job opportunities to boosting safety for residents.
“The goal for us was to articulate a vision that our stakeholders in the community shared,” said Katy Locker, vice president of programs for Hudson Webber Foundation. “We’re focusing on a targeted area, our greater downtown, and building that place to attract and retain talent.”
One of the foundation’s highlights has been the “Live Downtown” initiative, in which employees at certain companies – such as Blue Cross Blue Shield of Michigan and Quicken Loans – receive perks for living in downtown Detroit. Incentives include up to a $20,000 forgivable loan toward the purchase of a home or a $2,500 allowance for first-year apartment renters.
Jake Marmul, who works at Quicken Loans in Detroit, is benefiting from the $2,500 rental subsidy. A Michigan native and 2011 graduate of the University of Notre Dame, he had his sights set on living in Detroit but had trouble finding an affordable apartment near the Woodward area, where many of Detroit’s cultural attractions are located. After learning last summer about the “Live Downtown” program, Mr. Marmul moved into a studio in May that overlooks Comerica Park, the Detroit Tigers stadium.
“I probably have more friends that live in Chicago, but for the amount of money I’m spending and my location, there’s just no way I could do that in any other city,” Marmul says.
For “creative and tech-savvy” new graduates, Detroit has plenty of job opportunities, Marmul says, citing his employer’s 150 tech-related openings. He plans to stay in Detroit for the long haul and will be eligible to receive another $1,000 toward his apartment if he renews his lease another year.
But even before the 15 by 15 initiative and organizations with similar goals, the city proved alluring to some young people. Since 2000, downtown Detroit has seen a 59 percent increase in the number of college-educated residents younger than 35, even as its overall population fell by 25 percent, according to a census data analysis by Impresa Inc., an economic consulting firm.
For a much smaller city aiming to become energized by growth, a “wholesale importation” of young adults may not be feasible or even desirable unless careers with money are available, says Frank Furstenberg, a University of Pennsylvania sociology professor specializing in urban sociology and demography. In a place like Niagara Falls, he says, a lack of jobs may deter young adults from moving there, despite the student loans incentive.
“It’s a little like asking people to get married if you give them $5,000. Will that increase the rate of marriage? The answer is probably no,” says Mr. Furstenberg.
The Urban Institute's Theodos says cities are “swimming upstream” to attract new residents unless they’re hawking a vibrant job market. Fields such as manufacturing and agriculture are germane to certain areas, so attracting a more cross-cutting labor base – as well as intellectual and human capital – is difficult, he adds.
But community officials remain optimistic that targeted strategies to entice college graduates can succeed, even if those graduates don’t take jobs within city boundaries. Piccirillo of Niagara Falls cites downtown Buffalo, N.Y., as a prime employment center that’s just 20 minutes away.
Young professionals would still contribute to boosting Niagara Falls’s economy by spending their discretionary income at nearby businesses, he says. A cluster of young professionals may also draw more employers to the area and create entrepreneurial opportunities.
Piccirillo says he recognizes the community won’t be completely enlivened until it demolishes blighted buildings and provides incentives to buy and renovate homes. For now, Niagara Falls is embarking upon the first step of that revitalization process: cultivating the attention of college graduates.
“We know that we need to get them here first, help them lay down roots here,” Piccirillo says. “Hopefully, they fall in love with our city and stay longer than two years.”