States Offering a Student Loan Repayment Tax Credit in 2025
As student loan balances continue to weigh on taxpayers, a small number of states offer student loan repayment tax credits to help offset the cost of paying down qualified education debt. These credits are state-level benefits, separate from the federal student loan interest deduction, and they are often misunderstood or overlooked.
For the 2025 tax year, only a limited number of states provide a true student loan repayment tax credit, often supported by a dedicated worksheet or state-specific form.
What Is a Student Loan Repayment Tax Credit?
A student loan repayment tax credit allows eligible taxpayers to claim a credit on their state income tax return based on actual student loan payments made during the year. Unlike deductions, credits directly reduce tax liability and, in some cases, can be refundable.
These credits are distinct from:
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The federal student loan interest deduction
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Employer student loan assistance programs
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Loan forgiveness or cancellation provisions
States With a Student Loan Repayment Tax Credit in 2025
Maine
Maine offers one of the most robust programs in the country: the Student Loan Repayment Tax Credit, often associated with the Educational Opportunity Tax Credit (EOTC).
Key features:
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Available to qualifying residents with eligible degrees
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Based on student loan payments made during the year
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Can be partially or fully refundable
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Requires completion of a state worksheet as part of the Maine return
This credit is commonly used by professionals who earned degrees in Maine or moved to Maine for work and are actively repaying student loans.
Minnesota
Minnesota provides a student loan credit for residents who make payments on qualified postsecondary education loans.
Key Features:
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Nonrefundable credit
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Subject to income limitations
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Calculated using a state credit worksheet
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Applies only to loans taken out for the taxpayer’s own education
While more limited than Maine’s program, it still offers meaningful tax relief for qualifying borrowers.
Maryland
Maryland’s Student Loan Debt Relief Tax Credit operates differently from most state credits.
Key features:
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Requires a separate application through the Maryland Higher Education Commission
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Approved applicants then claim the credit on their Maryland return
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Annual funding is capped statewide
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Not all applicants are approved, even if otherwise eligible
Because of the application requirement, this credit must be planned for well before tax filing season.
States Without a Student Loan Repayment Tax Credit
The majority of states do not offer a student loan repayment tax credit in 2025. While many states conform to the federal student loan interest deduction or offer education-related incentives (such as 529 plan credits), they do not provide credits tied directly to loan repayment.
Taxpayers in these states are generally limited to:
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Federal student loan interest deductions
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Education credits unrelated to loan payments
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Employer-provided repayment assistance (if available)
Key Planning Takeaways
Student loan repayment tax credits are state-specific and rare Eligibility rules vary widely and may include:
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Degree type
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Year degree was earned
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Residency requirements
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Income limits
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Some credits are refundable, while others only offset tax
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Proper entry often requires a state worksheet, not just a single data field
Bottom Line
For the 2025 tax year, Maine, Minnesota, and Maryland are the primary states offering a true student loan repayment tax credit. If a taxpayer lives or works in one of these states and is actively repaying student loans, the credit can provide meaningful tax savings — but only if it is properly documented and claimed.
Because these credits are frequently missed or entered incorrectly, reviewing eligibility and state-specific requirements is essential before filing.
