TRENTON – Legislation sponsored by Senator Nia Gill to provide financial relief to residents with college debt by establishing a state income tax deduction for interest on student loans was approved today by the state Senate. The deduction is currently offered at the federal level.
“College debt has unfortunately become a lasting burden for too many residents,” said Senator Gill (D-Essex, Passaic). “Offering a deduction for student loan interest at the state level will help to provide financial relief to those paying on loans and will reduce costs for students and their families going forward.”
Today’s students are taking on heavy levels of debt as the burden to finance college has shifted more decisively to students and their families. In 2004, total student loan debt was $350 billion. It now stands at a startling $1.2 trillion. Between 1992 and 2012, the average amount owed by a typical student loan borrower who graduated with a bachelor’s degree more than doubled to a total of nearly $27,000.
The bill (S1136) would allow state income tax deductions for interest on student loans for families with joint incomes up to $160,000 or single incomes to $80,000. The legislation would permit a taxpayer to deduct from gross income the same amount as the federal income tax deduction under the Internal Revenue Code for interest paid on education loans. The current maximum federal deduction allowable for student loan interest is set at $2,500.
Under the bill, institutions of higher education would be required to make all tax deduction information available on their websites and financial aid shopping sheet.
The bill was approved in the Senate by a vote of 37-1. It next goes to the Assembly for consideration.