State lawmakers are moving forward with a plan to radically overhaul the tax credit available to Mainers to help with student loan debt.
A new proposal unanimously approved by the Legislative Taxation Committee this week would replace the hefty Educational Opportunity Tax Credit with a simpler version that supporters say would help many more Mainers .
“It’s an oversimplification of the program,” said Sen. Matthew Pouliot, an Augusta Republican who sponsored it.
The new proposal, which apparently has the backing of Governor Janet Mills, would apply to Mainers who graduated after 2007 and provide up to $2,500 in refundable tax credits for student loan repayments they make each year.
Anya Trudy, director of legislative affairs for the state’s Department of Administrative and Financial Services, said the administration is “very excited” about the upcoming tax credit review.
“It’s going to radically simplify it,” she told the committee.
Funders said it would mean up to 40,000 Mainers would receive up to $2,500 each to help them with the burden of their student loans. No one would get more credit than they actually repay their loans.
“Let’s cut to the chase here: State of Maine pays off student loan debt” if the measure is approved this session, Pouliot said.
About 13,000 Mainers use the existing tax credit to recover money each year, officials said, with a median credit of about $2,000.
Some, however, receive close to $4,000 and could face a reduction in the aid they receive from the state.
“For them, it’s going to be quite a shock,” said Sen. Benjamin Chipman, a Democrat from Portland who co-chairs the tax panel.
Pouliot said it’s best for Maine to “rip the band-aid 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 “small cohort of people” who might find themselves worse off with the proposed change, as Pouliot put it, might end up with some relief, though. The administration is discussing whether there is a way to ease the transition for these Mainers.
The new proposal, crafted by lawmakers and members of Mills’ administration, would significantly reduce the complexity involved for both bureaucrats and people struggling to pay off student loan debt, the backers said.
Pouliot said the experts involved predicted that three times as many Mainers would benefit from simplified credit.
Under the proposal, which requires the support of the legislature and Mills, the new credit would likely take effect in 2023.
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