Student loan tax credit proposed for 2017

Every extra dollar can make a world of difference for former students facing the reality of monthly school loan payments.

Legislators recognized that constituents across the state need help, and it led to legislation.

“Student debt is the number one concern of this committee,” said Rep. Bud Nornes (R-Fergus Falls). He chairs the House Higher Education and Career Readiness Policy and Finance Committee.

HF20, sponsored by Rep. Greg Davids (R-Preston), would provide post-secondary students with a $500 to $1,000 tax credit toward loan principal or interest payments beginning in tax year 2017. To be eligible, the loans would need to be associated with the cost of attending either an undergraduate or graduate degree program at an educational institution that is eligible for federal financial aid.

General Fund dollars would be appropriated for this program. No fiscal note was provided, but supporters say an estimated 75,000 people could be impacted.

Approved by the committee Wednesday, it now heads to the House Taxes Committee. It has no Senate companion. The provision was included in last session’s vetoed tax bill.

“We’re looking at a crisis,” said Davids, who chairs the tax committee. “This would help the people who work in Minnesota to reduce some of their debt. … It probably doesn’t go as far as some would like.”

With borrowing for education increasing by 89 percent nationwide from 2004 to 2014, student debt has arguably become an economic epidemic. In Minnesota, the average debt to obtain a bachelor’s degree was $26,822 in 2015.

The tax credit would be equal to the percentage of eligible loan payments exceeding 10 percent of adjusted gross income. Individuals with eligible loans could receive up to 50 percent of the maximum allowance, individuals with a public service job could receive 65 percent and individuals in the education profession could receive 75 percent.

Married couples could both claim a credit, but it could not exceed someone’s earned income for the entire year.