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President Joe Biden’s announcement last week that his administration planned to forgive $10,000 in student loan debt for millions of Americans was met with cheers from those who welcomed the news as a way to help young American struggling under the weight of college debt and jeers from those who saw it as an unfair handout.
But even those who cheered the news acknowledged that the one-time forgiveness – which can be up to $20,000 for low-income students who received Pell Grants – wasn’t enough for many people.
So, it’s worth remembering that Maine already has programs to help the state’s residents reduce their education debt. The most notable is the Educational Opportunity Tax Credit. Under this program, people who live and work in Maine and who borrowed money to attend college can get a tax credit of up to $2,500 per year, and up to $25,000 total over their lifetime. That’s one of the most generous education loan repayment tax credits in the country. And, with Maine’s recent graduates carrying an average of $33,000 in student loan debt, the credit – over roughly a decade – can cover much of that debt.
The program was created in 2007 after a group of mostly young activists sought a statewide referendum on a loan forgiveness plan. The plan, which was sold as a way to keep college graduates in Maine, was passed by the Legislature instead.
The program had been criticized for being too complex, which kept many qualified people from applying. So, lawmakers this year simplified the credit, which will be called the Student Loan Repayment Tax Credit beginning with the 2022 tax year.
Those who live and work in Maine and obtained an associate, bachelor’s or graduate degree after 2007 from accredited colleges and universities, both in Maine and in other states, will be eligible for the tax credit. In the beginning, the credit was only available to those who had graduated from colleges and universities in Maine. Lawmakers then expanded the program in piecemeal fashion, so there was a confusing mix of graduation dates and programs that qualified Mainers for the program.
That has all been simplified under the new credit. A simpler worksheet and more details will be forthcoming from Maine Revenue Services.
With a simpler credit – and efforts to increase awareness of it – the Mills administration estimated that 40,000 Mainers will become newly eligible for the program in the next two years and that $85 million in student loan debt will be retired through fiscal year 2023. That’s money that could be spent on other things, such as housing and childcare.
The state also has scholarships and tuition assistance programs for those entering health care professions, an area with ongoing shortages of workers. With increased funding from lawmakers and Gov. Janet Mills, Maine can offer more scholarships for future doctors and expanded training opportunities for a wide range of medical personnel.
Financial support is also crucial while students are in school, to help them not incur debt in the first place. In addition to federal student aid and financial assistance from colleges and universities, the Maine State Grant Program provides need-based assistance of up to $2,500 to undergraduate students. The grant amount was raised from $1,000 to $2,500 in the state budget passed by lawmakers earlier this year.
More significantly, the state’s new initiative offering two years of community college for free will allow students in Maine to begin or complete a degree program without borrowing money. This education in turn will improve their employment opportunities and increase their lifetime earnings.
After the announcement of two years of free community college, the state’s seven community colleges saw substantial increases in enrollment for the fall semester.
State financial support for the University of Maine System has decreased in recent decades, prompting the campuses to rely more heavily on rising tuition to cover their costs. However, because the state budget passed this year increased state funding for the system, the campuses pledged to freeze tuition for in-state students.
This again highlights the benefits of up-front state support of higher education.
If you are thinking of attending a college or university, are in college or are paying off student loans, there are many programs in Maine that can help. The Finance Authority of Maine has a list of state and federal programs, including tax credits, that can make higher education more affordable.
