PORTLAND, Maine — Student loans nationally have swelled into a $1.5 trillion crisis. 45 million borrowers have student debt. It’s the second largest consumer debt category after mortgage debt.
The Class of 2017 has an average of $28,650 in student loans according to the Institute for College Access and Success. Maine has a solution to help borrowers pay off their crippling debt and interest, and it has to do with the way you pay taxes.
The state of Maine doesn’t have a large population, especially of young workers. Without some kind of intervention, the state’s economy could collapse. Maine draws in some 36 million tourists each year with its sandy beaches and world-class skiing resorts, but the median age of residents there is 44. That’s five years older than the median age across the rest of the United States.
Maine’s Educational Opportunity Tax Credit program started in 2008. Originally, it was meant for young professionals already living in the state. The program targets college grads and allows them to use their loan payments as tax credits. However, the state expanded the program a couple of years ago to bring in people from other states. The catch? You have to have graduated after 2015 from an accredited school in the United States. There are some special rules from the years 2008 to 2015 which are almost entirely for Maine residents and graduates.
“Over time, the employer community spoke out loud and clear that even if 100% of college graduates in Maine chose to stay here and work, that still [wouldn’t] fulfill our workforce needs,” Nate Wildes, engagement director for the private-sector initiative Live + Work in Maine .
Now when recent college graduates move to Maine, the money spent toward paying off student loans is subtracted from state income taxes – this is especially great if you own a home or work freelance or have other situations that result in higher taxes.
Those who work in science, technology, engineering, and math fields could even get a check back from the government. STEM workers fall under a non-refundable tax credit program, which means they would owe no money in state taxes under the same scenario.
State lawmakers made these changes to the tax system because they realized without a younger population, they could soon be facing a crisis with an aging population.
“This is a substantial financial investment by the state, many millions of dollars,” Wildes said. “But we recognize that student loans are a big financial burden and emotional burden.”
Wildes actually moved to Maine partly because of the initiative.
“The tax credit program was the gravy to make that transition much easier,” he said. “This speaks to financial perks but also of the culture in Maine.”
It is the only statewide program of its kind. Similar programs are tied to individual schools or geographical areas. It’s by far the most general universal tax relief program in the United States.
Tax incentive plan to help younger generations out of student loan debt
The state government shelled out $13.1 million in tax credits to 7,290 student loan borrowers in 2016, up from around $6.7 million to 4,666 borrowers in 2014.
Before making a bold move to Maine, make sure to compare costs, benefits, and salaries.
“One needs to consider how salaries in Maine compare with salaries elsewhere,” said Mark Kantrowitz, publisher of SavingForCollege.com. “If your salary elsewhere is higher, you might be able to create your own loan forgiveness program.”
Maine’s program is likely to have a meaningful impact on the state’s economy considering the current population is just around 1.3 million.
“If we attract 40,000 to 60,000 new people over the next five to 10 years, and those people meet the workforce needs, that’s an exorbitant amount of people for Maine,” said Wildes.
The expanded Maine tax rules took effect in 2016. It is important to note if you live in Maine the tax rule will apply if you have a bachelor’s or associate degree from an accredited United States school. If you have a master’s, it must be from Maine at this time.
Some of the jobs that need to be filled in Maine that require a college degree include: social work, mental health, engineering, environmental science, education administration, counseling, and the medical field.
Maine is home to lobsters, beaches, and pretty lighthouses. Portland is home to museums, parks, mansions, battle sites, and breweries. Bangor is home to Stephen King and many of his horror stories.