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House committee hears pair of bills aimed at helping lessen load of student debt

Catalina Anampa Castro, chair of the University of Minnesota Student Senate, testifies Feb. 5 in support of a Rep. Jamie Becker-Finn, left, bill to make refundable a tax credit for payments of student loan principal and interest. Photo by Paul Battaglia

Getting $500 would help.

Many Minnesotans paying off student loans would receive that much more in their tax refund under HF502, sponsored by Rep. Jamie Becker-Finn (DFL-Roseville). It would make the state’s student loan tax credit — which reduces a payer’s tax liability by up to $500 — into a refundable credit.

It was one of two bills related to student loan payments laid over Tuesday by the House Taxes Committee for possible omnibus bill inclusion. Neither has a Senate companion.

The other, HF503, sponsored by Rep. Tou Xiong (DFL-Maplewood) would eliminate a “marriage penalty” built into the student loan tax credit. Currently, married joint filers with student debt cannot claim as large a credit as those filing separately.

Under the student loan tax credit, loan payments are reduced by 10 percent of federal adjusted gross income over $10,000, up to $500. In tax year 2017, student loan credits totaled $22.5 million on 50,500 returns.

According to Department of Revenue projections, making the credit refundable would increase the credit for 12,100 returns, an average of $305. Eliminating the marriage penalty would increase the credit for about 1,800 returns, averaging $357 per return. If the two bills become law, reductions in revenues to the state’s General Fund would total between $5.1 million and $5.5 million annually through Fiscal Year 2023.

Tricia Grimes, legislative liaison for the Office of Higher Education, offered statistics about median student loan debt for Minnesotans.

The median debt load is $16,600 for those with an associate’s degree, $25,500 for graduates with a bachelor’s degree, and $36,900 for those with a master’s degree. More than two-thirds of Minnesotans with a bachelor’s degree use loans to achieve it, she said. Grimes also said that, while Minnesota performs better than most states in avoiding defaults on loans, 12,400 Minnesotans defaulted on student loans in 2015.

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