Maine is offering student debt relief to graduates who live and work in the state.
Known for its lobster and lighthouses, Maine also has one of the oldest populations in the U.S. — the median age in the state is 43, around five years older than the rest of the country. To attract younger workers, Maine is providing tax credits to student loan borrowers.
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
It’s unsurprising that demand for relief is on the rise. Outstanding education debt in the U.S. now exceeds $1.5 trillion, posing a greater burden to Americans than auto or credit card debt. Average debt at graduation is currently around $30,000, up from $13,000 in the late 1990s.
Maine’s program — called the Educational Opportunity Tax Credit — began as a way to encourage residents to stay in the state after they graduated college and was available only to people who had studied there. It has since expanded to people who hail from any college in the U.S., so long as they graduated after 2016.
The details of the program vary based on when you graduated and whether you are from Maine or elsewhere.
But generally, people are able to subtract their total student loan payments over the year from their state income tax liability. So if you owe the state $2,000 in state income taxes and you paid $1,800 in student loans, you’ll owe Maine just $200.
The terms are more generous for people with STEM degrees. Borrowers from science, technology, engineering and mathematics fields can get a check from the state if the amount they paid for their student loans exceeds their state income tax liability for the year. For example, if an engineer paid $2,500 in student loans and owed just $2,000 in state income taxes, she’ll receive $500 from Maine.
“If you have a STEM degree the state will, and often does, pay you, instead of you paying the state on your income taxes,” Wildes said.
Before you start packing, mull over the advantages you might lose by leaving your current location, said Mark Kantrowitz, publisher of SavingForCollege.com. “One needs to consider how salaries in Maine compare with salaries elsewhere,” he said. “If your salary elsewhere is higher, you might be able to create your own loan forgiveness program.”
The average salary in the state is $45,300. Maine offers opportunities in the information technology and health-care sectors, and there are many new start-ups popping up, Wildes said. The unemployment rate hovers around 3 percent, lower than the national rate, which is closer to 4 percent.
The program is likely to have a meaningful impact on the state’s economy, Wildes said, 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.
Written by Annie Nova, published on CNBC.com 10/15/18