New legislation in the North Dakota Legislature would give a state income tax credit for student loan borrowers.
House Bill 1365, introduced by Rep. Pamela Anderson, D-Fargo, would create an income tax credit for higher education student loan interest payments. The credit would not be allowed to exceed a taxpayer’s liability and any credit exceeding the liability can be carried forward for up to five taxable years.
“Student loans can be a significant monthly expense,” she said, noting that a tax credit, rather than a deduction, would likely be best for most graduates who are working to pay back their loans.
Student loan interest is paid through the Bank of North Dakota and eventually make their way into the state’s general fund. Anderson indicated that the people paying the interest on the loans would be able to better utilize the dollars, even if the amount that would be credited would not be high.
Whether a bill like this would likely pass the House or Legislature remains to be seen, especially given current budget restraints, but Anderson expressed hope the legislation will pass. She also views it as a way to incentivize students to stay in North Dakota.
“We can’t afford to not help students stay in the state,” she said.
Some tax credits already exist for federal loans that help offset the costs of college, including for tuition, fees, books, supplies and equipment. The American Opportunity Credit allows an individual to claim as much as $2,500 per student per year for the first four years of school as the student works toward a degree or similar credential. The Lifetime Learning Credit allows someone to claim up to $2,000 per student per year for any college or career school tuition and fees, as well as for books, supplies and equipment that were required for the course and had to be purchased from the school.