A new proposal suggests creating a state tax deduction for interest paid on student loans.
House Bill 219, sponsored by Rep. Mary Isaacson, D-Philadelphia, said the measure would mirror the federal deduction and encourage more college graduates to settle in the state long term.
“Pennsylvania needs to start making itself friendlier to young people,” she said.
Her sentiment was echoed by fellow Philadelphia Democratic Rep. Ben Waxman, who noted that major corporations in his district are having trouble attracting qualified candidates to the state.
Supporters say that a student loan deduction, a gesture of goodwill toward the younger generation, would be a small sacrifice in keeping with federal precedent. Isaacson noted that the money saved by taxpayers would go straight back into the economy, not to mention the growth they would see if more young people chose to stay in or move to the state after graduation.
Making the state more attractive to young people is a difficult task by the numbers. According to Diana Polson, senior policy analyst at the Keystone Research Center, student loan debt in the state has almost quadrupled in the past 20 years from $19 billion to $76 billion.
It’s a staggering figure which Committee Majority Chairman Rep. Steve Samuelson, D-Bethlehem, noted is higher than the state’s entire budget.
Pennsylvania graduates carry the third highest debt load in the nation and are sixth in the number of students graduating with debt. Over two million Pennsylvanians hold an average of over $39,000 in student debt. Among them, rural students and students of color are disproportionately represented.
While tuition and debt have skyrocketed, income has not. Polson noted that tuition rose by 47% in 20 years, while the median household income rose by only 13%, creating a gap that has pushed more and more students into taking on increasingly high loans.
This means Pennsylvania graduates are paying an average of $2,280 annually in interest, which would make them eligible for about a $70 deduction under the bill according to Samuelson.
Some are worried about the impact the deduction would have on the state’s coffers along with several other tax relief bills under consideration. Representative Keith Greiner, R-Lancaster, a CPA by trade, noted that “it’s not a bad bill,” but still wasn’t convinced.
“Our state’s in trouble financially, and in three years, we definitely have a serious structural deficit,” he said.
Advocates of the bill suggest that reducing tax credits to corporations and closing loopholes would be better sources of income than taxes from those shouldering the burden of student loan debt.
“I am all in favor of making our tax code less complicated,” Waxman said. “I would love to start with some of the tricks that are used by some of our largest corporations to avoid paying their fair share.”
