The state of Maryland is offering a student loan tax credit worth up to $5,000, but time is running out to apply.
The Student Loan Debt Relief Tax Credit is offered through the Maryland Higher Education Commission (MHEC) and is available to state taxpayers who took on at least $20,000 in loans.
Why It Matters
Student debt remains a major financial burden for millions of Americans, with recent Pew Research indicating that one in four U.S. adults under 40 carries student loan debt, usually between $20,000 and $25,000.
The resumption of student loan interest for more than 7 million borrowers in SAVE forbearance has put additional pressure on repayment efforts nationwide.
Libby O’Neill/Getty Images
What To Know
For Maryland residents, the Student Loan Debt Relief Tax Credit provides a targeted opportunity to ease this burden, potentially saving individuals thousands of dollars. However, the application window for 2025 closes on September 15.
As loan balances and monthly payments rise, state-sponsored programs like this are of growing relevance to borrowers and the broader economy, offering a model for how states might alleviate student financial challenges.
Eligible applicants can receive an average tax credit of about $1,870, with awards reaching up to $5,000 for the 2025 tax year. The pool for this year’s credits is $9 million, with priority given to state employees.
“This is an incredible opportunity for in-state borrowers, especially those who are seeing interest starting to accrue after years of a pause on accumulation,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
Last year, nearly 85 percent of applicants qualified for some level of relief, and applicants may apply each year without a cap.
“This is for Maryland residents who took on at least $20,000 in student loans and still have a balance of $5,000 or more,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek. “You’ve also got to be actively paying on your loans—so if you’re in deferment or default, you may not qualify.”
Eligibility Requirements
- Be a Maryland taxpayer who maintains Maryland residency for the 2025 tax year.
- File a Maryland state income tax return for 2025.
- Have initially incurred at least $20,000 in undergraduate or graduate student loan debt.
- Have at least $5,000 in outstanding student loan debt at the time of application.
- Be actively making student loan payments.
“Most people that apply do qualify for some amount of money, so we want to make sure that people know, don’t count yourself out, because it is very likely that you will qualify for at least some amount of money,” Kristin Clarkson, communications director at MHEC, told Baltimore station WMAR-2 News.
Applicants should gather necessary documents from their loan servicers and tax preparers as soon as possible.
Recipients must apply the awarded credit directly to their student debt and provide receipts to the MHEC.
Borrowers have three years to show proof that the full credit amount was paid toward their loan. Failure to submit proof by the stated deadlines for any given year results in the state recapturing the tax credit through the Comptroller’s Office.
Further details and application materials can be found on the MHEC website
Alongside the state credit, borrowers may also be eligible for federal tax deductions of up to $2,500 in student loan interest, subject to income limits. For 2024, those who paid $600 or more in interest should receive a Form 1098-E from their lender and can review IRS rules on the IRS website.
What People Are Saying
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: “Some states have leftover funds from previous programs, and Maryland is putting those dollars to work. It makes sense—if you’re buried in student debt, you’re probably not spending much, and that means less tax revenue for the state. By freeing up some of that burden, the state hopes folks can spend more, maybe save more, and eventually put more money back into the local economy.”
Bobbi Rebell, a certified financial planner and consumer finance expert at CardRates.com, told Newsweek: “This is a great resource for so many borrowers but the clock is ticking. The key here is to go back into student mode and make sure you study all the rules and make sure to follow every single one, leaving no room for error. The slightest technical mistake will cost you dearly.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “For residents of other states, this Maryland-based program is undoubtedly one that will make them envious of those who qualify. The amount varies per filer, but the amazing thing of the credit is the already outlined qualifications are the only rules. There are no additional income requirements.”
What Happens Next
Applicants must submit all required materials by September 15.
“Pay attention to the deadline and the details,” Rebell said. “Get started now because you may be dependent on others like your accountant or tax preparer to give you the proper documentation and they may be on vacation.”
The Maryland Higher Education Commission will notify successful candidates by December 2025.
Recipients then have three years from the close of the applicable tax year to demonstrate that the awarded funds were directly applied to their student loan, or risk having the credit recaptured by the state.
“It won’t fix everything—wages and living costs are still rising—but it’s a start. And it might help people get ahead just a little faster,” Thompson said.