Illinois could pay off up to $40,000 of your student loans to help you buy a house

• The Illinois SmartBuy program pays off up to $40,000 in student loans to help buyers buy a house.
• The program also provides $5,000 to be used for a down payment or closing costs.
• With house prices reaching record highs, the program may help increase home equity and affordability.

If you live in Illinois and have outstanding student loans, the state could pay off some of your debt to help you buy a house.

The SmartBuy program, offered by the Illinois Housing Development Authority, helps anyone who wants to buy a home in Illinois by paying off up to $40,000 in student debt, or a loan amount equal to 15% of the home purchase price. According to the Chicago Tribune, between the start of the program in December and early April, it has paid off an average of $24,100 in student debt for each buyer, and people from outside the state have even been inclined to move there to make use of the program.

"I'm getting a lot of interest," Chanon Slaughter, a vice president of mortgage lending at Guaranteed Rate, told the Tribune. "I am getting folks literally saying, 'I want to move back to Chicago for this program.'"

Along with paying off student loans, the program also provides $5,000 that can be used for a down payment or closing costs.

There are a few catches, though: A buyer's outstanding student debt must be paid in full at the time of the home purchase, and if the buyer chooses to sell the house within three years of the purchase, they must repay a portion of the student loan assistance. The other catch is that Illinois has allocated $25 million to the program, so it's only expected to help between 600 and 1,000 homebuyers.

Here are the program's eligibility requirements, according to its website:

• The buyer must have at least $1,000 in student loans;
• The buyer's FICO "mid-score" must be 640 or higher;
• The buyer's income must be under or at the limits for the county where the property is located, which can be found on the IHDA mortgage website;
• And the assistance cannot be applied retroactively - the buyer must be buying a new primary residence.

This program has the potential to tackle two simultaneous affordability crises - the $1.7 trillion pile of student debt and the skyrocketing price of the median house since the housing market reopened during the pandemic, exacerbated by a serious inventory shortage. It isn't the only experimental economic program being offered in Illinois, either. Evanston, a city in Illinois, approved spending on March 22 for a $10 million reparations fund that compensated Black residents through $25,000 housing grants.

Insider previously reported that the average home sale price hit a record high March, and the spiking housing costs have concerned housing experts, like Redfin Chief Economist Daryl Fairweather, who said in a statement that they could be putting homeownership out of reach for too many Americans.

"That means a future in which most Americans will not have the opportunity to build wealth through home equity, which will worsen inequality in our society," Fairweather said.