Tags: student | loan | assistance | state | economy

Can Student-Loan Assistance Stimulate a State's Economy?

young woman in blue cap and gown from graduation holding stacks of cash and crying
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Thursday, 18 October 2018 02:52 PM Current | Bio | Archive

Maine is looking to attract younger workers to stimulate the economy and fill open jobs by extending an important tax credit for graduates with student loans.

With Maine's student loan default rates decreasing for the fiscal cohort year 2015, the state wants to help borrowers even more by extending their Education Opportunity Tax Credit to bachelors or associate borrowers that graduated from any accredited school in the country after 2016, who live and work in Maine. Previously, the tax credit was only offered to graduates of Maine schools.

Maine's Current Employment State

Maine is currently having trouble filling jobs and is trying to encourage graduates to live and work in the state. Maine hospitals are still coming up with ways to recruit and keep nursing students, including offering signing bonuses of up to $10,000 and even paying for nursing school. It is projected that Maine will be short 2,500 to 3,000 nurses by 2025. And as a whole, the Maine Department of Labor reported a net growth of only 94 jobs from 2016 to 2026, meaning the state would only add nine jobs to the economy each year.

One big reason why employment isn't growing is that Maine has an older resident population. Compared to the rest of the country, Maine has the oldest residents, with an average age of 43.1, according to the S&P Global. And the average age of residents has risen every year since 2012. As these residents get older, more will retire, which will leave gaps in the job market.

How Maine Will Attract Graduates

As student loan debt has now surpassed $1.5 trillion, borrowers are looking for ways to ease their debt burden. To help graduates, Maine created the Educational Opportunity Tax Credit, which allows borrowers to deduct their total student loan payments for the year from their state income tax liability. This means that if you owe $1,500 in state income taxes and you paid $1,000 in student loans for the year, you will only owe the state $500.

If your student loan payments happen to exceed your tax income liability, borrowers with associate degrees in any major or bachelor degrees in STEM fields will get a refundable tax credit, meaning that they will receive a check for the remaining credit. And for borrowers with bachelor's degrees in non-STEM fields or graduate degrees earned at Maine schools, tax credits are nonrefundable, but the remaining balance may be used over the next following 10 tax years.

Will Offering Student Loan Assistance Help Maine's Economy?

It is yet to be seen if offering student loan tax credits will help Maine's job outlook. However, since student loan debt and finding a job are huge issues for many Americans, the incentive may have a positive impact for Maine. Some companies are trying out similar strategies to attract and retain employees, allowing their employees to pay down their student loans while matching that contribution and putting it into a 401(k).

Looking at the country as a whole, many articles have come out with the opinion that canceling student loan debt can have a major positive impact on the economy. A report from Levy Economics Institute of Bard College found that student loan debt cancellation could result in an increase in average households' net worth and disposable income while having a positive effect on consumption and investment spending as well as decreasing unemployment. Maine is not offering to completely cancel debt, but depending on the effects of student loan assistance, other states may follow and there could be more benefits for borrowers in the future.

How to Find if Your State Has Student Loan Assistance

If you are struggling with your student loans, you should check to see if your state offers any assistance, such as tax credits, job incentives and student loan forgiveness. Many states provide student loan forgiveness specifically for borrowers in their state, different from the public service loan forgiveness that the Department of Education offers.

Nurses, teachers, public defenders and veterans are frequently offered assistance or forgiveness, depending on their state. To check there are student loan assistance options available to you, visit your state's government website or contact your state agency.

Joe Resendiz is a Research Analyst at ValuePenguin, where he focuses on personal finance and credit research to assist consumers. Previously, Joe specialized on public sector and infrastructure financing at Goldman Sachs. He graduated from the University of Texas at Austin with a BBA in Finance.

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JoeResendiz
Many states provide student loan forgiveness specifically for borrowers in their state, different from the public service loan forgiveness that the Department of Education offers.
student, loan, assistance, state, economy
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2018-52-18
Thursday, 18 October 2018 02:52 PM
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