Maryland Student Loan Forgiveness Programs

Maryland ranks second in the nation for average student loan debt per borrower at over $42,000, surpassed only by the District of Columbia. To alleviate this burden, Maryland residents have access to various federal and state forgiveness opportunities and tax credits.

One such opportunity is President Biden’s debt cancellation plan, currently awaiting a Supreme Court decision. It could eliminate up to $20,000 of federal student loan debt for over 320,000 Marylanders if approved.

Regardless of the plan’s fate, Maryland residents can still benefit from federal forgiveness programs and state-based initiatives like the Maryland Student Loan Debt Relief Tax Credit, which awarded nearly $9 million in 2022 tax credits to eligible borrowers.

Ahead we’ll explore the student loan forgiveness options available to Maryland residents, including federal and state programs, and guide you on taking advantage of these opportunities.

Related: State-Based Student Loan Forgiveness Programs

Before exploring Maryland-specific programs, let’s discuss the federal student loan forgiveness programs the Department of Education offers to all Americans, including Maryland residents.

These programs provide relief for federal student loans based on factors such as your profession or income.

1. The Public Service Loan Forgiveness Program

The PSLF is designed for individuals working in qualifying public service jobs with Direct Loans.

To be eligible, borrowers must make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer, such as a government agency, public school, or nonprofit organization.

2. Income-Driven Repayment Plan Forgiveness Waiver

Starting in spring 2023, relief will be automatic for most borrowers who have been paying their federal student loans for 20 years or longer, letting them see the rest of their debt discharged.

These changes result from a new IDR account adjustment announced by the Biden administration in April 2022.

For one time only, nearly every month spent in student loan repayment or a long-term forbearance since leaving school will count toward forgiveness.

All federal student loans are eligible for this one-time account adjustment — including Parent PLUS Loans, Consolidation Loans, Federal Family Education Loans, and Perkins Loans. But some borrowers will need to consolidate to qualify.

The U.S. Department of Education and the White House estimate that once implemented, the IDR Waiver will immediately eliminate federal student loan debt for over 40 thousand borrowers and bring millions more at least three years closer to income-based repayment forgiveness.

3. President Joe Biden’s Broad Debt Cancellation Plan

This student debt relief program promises to wipe out up to $20,000 of debt for Pell Grant recipients who meet income criteria and up to $10,000 for other qualifying borrowers.

Applications are on hold as the Supreme Court assesses the program’s legality.

Meanwhile, the Biden administration has prolonged the pandemic-related payment pause and interest rate freeze, lasting 60 days after the Court decides on President Biden’s student loan cancellation plan or until June 30, whichever occurs first.

Maryland offers various student loan forgiveness programs for residents working in public service professions and even those looking to buy a home. Below, we highlight four notable programs.

1. Janet L. Hoffman Loan Assistance Repayment Program

This program awards varying amounts to Maryland residents who provide public service in Maryland State or local government or nonprofit agencies to low-income or underserved residents or underserved areas in the state.

Eligibility requirements include having earned a degree from a college in Maryland, working full-time in an eligible position, and meeting specific income requirements.

More Information: Janet L. Hoffman Program

2. Maryland Dent-Care Loan Assistance Repayment Program

This program provides up to $23,740 annually for three years to dentists who commit to serving at least 30% of Maryland Medical Assistance Program (MMAP) recipients as part of their total patient population.

Dentists must enroll in MMAP’s Maryland Healthy Smiles program and maintain records of all patients treated.

More Information: Dent-Care Loan Assistance

3. Maryland SmartBuy Home Buyer Assistance & Forgiveness Program

This program provides up to 15% of the home purchase price (minimum of $1,000) towards outstanding student loans when purchasing any home in the State of Maryland that meets the program’s guidelines.

The loan must be in repayment or deferment, and the full outstanding balance must be paid off at closing.

More Information: Maryland SmartBuy Program

4. Maryland Student Loan Debt Relief Tax Credit Program

The Maryland Student Loan Debt Relief Tax Credit Program, administered by the Maryland Higher Education Commission (MHEC), offers tax credits for eligible Maryland residents to reduce the burden of outstanding student loan debt.

These tax credits apply to both undergraduate and graduate student loan debt.

Eligibility Requirements

• At least $20,000 in education loans.

• At least $5,000 in outstanding student loan debt.

• Did not receive

• Provide proof of loan balances.

• Both federal and private student loans are eligible.

Tax Credit Calculation and Usage

• The tax credit is calculated based on the applicant’s gross income.

• Tax credits can be claimed on the taxpayer’s state income tax return.

• If the tax credit exceeds the amount of taxes owed, the excess will be refunded to the applicant.

• The award amount must be used to pay off the student loan debt within two years from the close of the taxable year.

• Maryland taxpayers must provide proof of payment to MHEC.

Prioritization of Tax Credits

The Commission shall prioritize tax credit recipients and dollar amounts based on qualified taxpayers who did not receive a tax credit in a prior year.

Application Process

• The application process is closed for the tax year 2022.

• To apply for the tax credit during the designated tax year, eligible individuals must submit an application to MHEC.

• Visit the Maryland Student Loan Debt Relief Tax Credit page for updates on the application process for the upcoming tax year.

Is Maryland going to tax student loan forgiveness? Maryland residents can rest assured, as the state will not tax potential federal student loan forgiveness under President Biden’s mass federal student loan debt cancellation plan if it’s implemented later this year.

For more information, refer to the Income Tax Alert from the Maryland Comptroller’s Office: Income Tax Alert – Student Loan Forgiveness (10/26/2022).

In Maryland, various state-specific student loan forgiveness programs are available to taxpayers and professionals in essential fields such as teaching, dentistry, and public service. These programs offer crucial financial relief and support to those who qualify and are dedicated to serving their communities.

While the outcome of Biden’s debt forgiveness plan for millions of federal student loan borrowers is still unclear, it’s important to remember that these state-specific programs remain accessible to eligible borrowers in Maryland.

Stay up-to-date with the latest developments in debt cancellation, both in Maryland and at the federal level, and seize the opportunities available. Enhance your understanding of these programs and make informed decisions by subscribing to our newsletter today.