Maryland limits repayment of unused student loan tax credits

A recipient who misses the repayment deadline must pay the unused credit as state tax. This applies to people who claim the credit and do not use the entire approved amount to repay undergraduate or graduate student loans. The Commission may extend the deadline in specified circumstances involving federal student loan delays. The three-year period runs from the close of the tax year for which the credit is claimed. The changes apply to tax years beginning after December 31, 2025.

The Maryland Higher Education Commission may extend the time a recipient has to use the credit for loan payments. This applies to credit recipients who could not make student loan payments for one of the listed reasons. An extension is allowed only if the person could not repay because of a pause during litigation over the federal SAVE plan, understaffing that blocked a change between income-based repayment plans, or a pause while awaiting a Public Service Loan Forgiveness buyback agreement and unable to make payments. The changes apply to tax years beginning after December 31, 2025. The Commission must adopt procedures for applying for an extension by October 1, 2026.