Leggett’s Office Opposes Plans for County-Run Student Loan Agency

A County Council member pitched the agency as a way to ease student debt for local teachers, but it’s facing stiff opposition


Office of Legislative Oversight report cover

Montgomery County Council member Tom Hucker’s plan to establish a county-run student loan authority is facing opposition from County Executive Ike Leggett.

The Silver Spring legislator first called for creating the agency in 2016 as a way to provide student loan refinancing at lower interest rates than private companies after learning more than half of the 800 members of Montgomery County Education Association—the local teachers union—had more than $40,000 in student debt.

Hucker, a former state legislator, helped pitch and guide enabling legislation through the General Assembly in 2016 that gave the county the ability to set up the authority. Now the next step is to have the County Council pass a bill to create and fund it.

That appears like it will be a difficult task. Last month, County Executive Ike Leggett came out against the proposal after Chief Administrative Office Timothy Firestine criticized the plan in a lengthy memo. Firestine noted student loan debt has the highest delinquency rate of all consumer credit debt. He noted the county would have to issue bonds to initially fund the authority, which could be risky due to the default rates on student loans. The county may also not be able to afford the initial funding costs of $3 million to $5 million given the tight county budget, according to Firestine.

He also wrote that  an Office of Legislative Oversight (OLO) review of the refinancing authority released at the end of June likely won’t satisfy the state law’s requirements that the county examine local market data to determine whether the agency would be financially successful.

Firestine suggested that the council, at the very least, wait for an upcoming state study that will examine economic conditions for a state student loan agency.  Even if that study reports favorable conditions, Firestine said “we do not recommend that council pursue a [student loan authority] as such a program is not fiscally responsible and is not the highest and best use of our limited county financial resources.”

Firestine’s memo came in response to the OLO report that examined similar authorities set up by state governments in Rhode Island, Alaska, North Dakota and elsewhere. Those states have used loan repayments to offset the startup costs. The report notes no county in the United States operates a student loan revenue or refinancing agency.

It also raises a number of recommendations for county leaders should they decided to move forward with setting up the agency. Those include conducting a local market study to determine the need for the refinancing authority and what types of loans to provide to which borrowers based on their income potential and credit scores. The report also recommended establishing the agency as part of the Montgomery County Revenue Authority, which operates a number of self-supporting services, such as the county’s golf courses and Air Park.

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