Minnesota

Student loan tax credit would increase tenfold under bill – Session Daily

B. Rosas wants to go back to school and get a higher degree.

“But the price just isn’t worth it anymore.”

Student loan debt is keeping the recent University of Minnesota graduate from pursuing his dream. A tax credit could relieve him.

Rosas spoke to the House Taxes Committee in support of HF443, a bill sponsored by Rep. Kaohly Vang Her (DFL-St. Paul). The state’s maximum student loan tax credit is currently $500, but would increase to $5,000 under the proposed legislation. It would also make the loan reimbursable and shift its income-based exit from $10,000 to $50,000.

The committee set the bill aside for possible inclusion of the omnibus bill.

House Taxes Committee bill to increase maximum student loan tax credit in MN 01/25/23

“In 2019, 50,900 Minnesotans benefited from the current student loan tax credit,” Her said. “Under this new bill, 132,400 more Minnesotans would be eligible. There are approximately 775,600 student loan borrowers in Minnesota who owe a total of $27.1 billion. The average student loan debt load is $30,894 for state students. Those with personal credit debt typically have about $8,000 to $10,000 more.

“It’s also an equity issue,” she added. “Black and African-American college graduates have an average of $25,000 more in student loan debt than white college graduates.”

Soon to be among them Marcelus Ifonlaja, a student at the Metropolitan State University and board member of Students United.

“Even though I hopped around in foster care, I made the decision in sixth grade that I wanted to go to college to provide my parents with a better home and better financial situation,” he said. “This bill is another incentive to live in Minnesota and start a family, something that as a former caregiver I’ve been very conscious of in my decision-making.”

Marcelus Ifonlaja is testifying before the House Tax Committee on Jan. 25 in support of a bill sponsored by Rep. Kaohly Vang Her, right, that would increase the state’s maximum student loan tax credit. (Photo by Andrew VonBank)

“Studies have shown that student loans have a negative impact on marriage, home ownership and birth rates,” Her said. “The problem of government labor shortages will only get worse if we don’t do more to attract a young, well-educated workforce. This bill encourages those with college degrees to move to Minnesota to work, live, spend, raise families and thrive.”

The Treasury Department estimates that the bill would cost the General Fund $262.9 million in fiscal 2024 and $446.8 million in fiscal 2025, and that approximately 196,400 tax returns would be affected in fiscal 2023.

“If we look at the cost of that, we’re looking at almost half a billion dollars for a loan to help pay,” said Rep. Chris Swedzinski (R-Ghent). “Perhaps we should take this significant amount and put it into higher education.”

A related bill was also tabled for possible inclusion in an omnibus tax bill: HF754, also sponsored by Her, would permanently adopt the American Rescue Plan Act’s exclusion of superseded student loans.

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