Students may receive more help paying off interest on their student loans if a bill circulating in the state Legislature is approved.
The Assembly Ways and Means committee held a public hearing on a bill Tuesday that would create a nonrefundable income tax credit for interest paid on student loans.
Currently, students can receive a federal deduction of up to $2,500 on student loan interest. Under the new bill, tax credit could be claimed for up to 50 percent of a loan’s interest. University of Wisconsin students graduated with an average debt of $22,858 in 2009, according to the UW Data Digest.
Since the credit is nonrefundable, it can only be claimed up to the amount of the loan holder’s income tax. The credit can only be claimed by Wisconsin residents.
“During my career as a college professor, I’ve seen many bright students from around the country, and even from around the world, who have come to Wisconsin to get a first rate education,” Rep. Kim Hixson, D-Whitewater, said at the hearing. “However, according to several studies, Wisconsin is losing many of these qualified graduates to other states.”
Hixson said he believes the bill can help keep students in Wisconsin and combat the so-called “brain drain” — from 1989-2007, Wisconsin has ranked among the 10 worst states in net migration of people holding a bachelor’s degree.
By keeping more graduates in the state, Hixson added, Wisconsin will increase its highly trained workforce, which can also spur economic growth. The tax credit would also help to make higher education more affordable for students.
“There are other factors involved, and you know, certainly it’s ‘Where are the jobs?'” Hixson said. “Given the choice between working in Wisconsin or going to Nevada or Arizona, that maybe this would make someone pause and say ‘Hey, I get this great tax credit on my interest payments on my loans, and maybe I should stay in Wisconsin.'”
Rep. Gary Hebl, D-Sun Prairie, also expressed support for the bill at the hearing and said with three kids of his own who have had to pay off interest on their student loans at around 6 to 7 percent interest rates, this bill could could be a great help.
“This could amount to quite a significant benefit for students paying interest on those loans,” Hebl said at the hearing.
Paul Gabriel, executive director of the Wisconsin Technical Colleges District Boards Association, said the organization is supportive of any bill that would help make college more affordable for students. Students from technical colleges typically tend to stay in Wisconsin, however, so the ”brain drain” is not as much of an issue for them.
“Such a huge proportion of students need to borrow in order to attend college and this would be a small help, and a help nevertheless at a crucial time,” Gabriel said.
Although they support the bill, Gabriel said their highest priority is to push for better financial aid and student grants, which lower the amount of debt a student has in the first place.
“[The bill] would be helpful, it would just be better in a perfect world if a lot more students would come out with smaller debt hanging over their head,” Gabriel said.
