The Legislature’s Committee on Taxation gave its blessing this week to a new plan to simplify and expand Maine’s student loan tax credit. Screenshot from video
State lawmakers are moving forward with a plan to radically overhaul the tax credit offered to Mainers to help with student loan debt.
A new proposal endorsed unanimously by the Legislature’s Taxation Committee this week would replace the cumbersome Education Opportunity Tax Credit with a simpler version that supporters say would help many more Mainers.
“It’s an extreme simplification of the program,” said Sen. Matthew Pouliot, an Augusta Republican who sponsored it.
The new proposal, which apparently has the backing of Gov. Janet Mills, would apply to Mainers who graduated after 2007 and offer up to $2,500 in refundable tax credits for student loan payments they make each year.
Anya Trudy, director of legislative affairs for the state Department of Administrative and Financial Service, said the administration is “very excited” about the looming revision of the tax credit.
“It’s going to radically simplify it,” she told the committee.
Backers said it would mean that as many as 40,000 Mainers would get up to $2,500 apiece to help them cope with the burden of their student loans. Nobody would get more from the credit than they actually paid back for their loans.
“Let’s just cut to the chase here: the state of Maine is paying off student loan debt” if the measure wins approval this session, Pouliot said.
About 13,000 Mainers use the existing tax credit to get back some money each year, officials said, with the median credit about $2,000.
Some receive nearly $4,000, however, and could face a reduction in the assistance they receive from the state.
“For them, it’s going to be quite a shocker,” said Sen. Benjamin Chipman, a Portland Democrat who co-chairs the tax panel.
Pouliot said it’s better for Maine to “rip the Band-Aid off right now” and fix the program to support more Mainers who “are getting hosed” under the current tax credit because it’s too narrow and complicated to use.
The “little cohort of folks” who might end up in worse shape under the proposed change, as Pouliot put it, may wind up with some relief, though. The administration is discussing whether there’s a way to ease the transition for those Mainers.
The new proposal, worked out by lawmakers and members of Mills’ administration, would drastically reduce the complexity involved for both bureaucrats and people struggling to pay off student loan debt, backers said.
Pouliot said experts who have been involved anticipated that three times as many Mainers would take advantage of a simplified credit.
Under the proposal, which needs the backing of the Legislature and Mills, the new credit would likely take effect in 2023.
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