🔒Adopted in 2022 to ease student loan burdens and support workforce recruitment, CT tax credit program sees no takers

Tax credits have value for businesses only when they are actually used. Gov. Ned Lamont made that point about a specific state tax credit during a January interview with the Hartford Business Journal, just before the start of the 2026 legislative session. Specifically, he referred to a measure he signed in 2019 that took effect Jan. 1, 2022, creating a business tax credit of up to $2,625 per employee for employers that make eligible student loan payments on a qualified worker’s behalf. State law caps the credit at $10 million annually. At full utilization, the program could help pay down student loans for more than 3,800 Connecticut employees. Lamont, however, lamented that he “can’t get anybody to take advantage” of the program. He wasn’t kidding. According to the state Department of Revenue Services (DRS), not one business has applied to use the credit since its inception. One explanation may be the program’s original design, which limited eligibility to loans issued by the Connecticut Higher Education Supplemental Loan Authority, or CHESLA. Lawmakers removed that restriction in 2025, allowing the credit to apply to a broader range of student debt. A DRS spokesperson said it's too early to determine whether the expanded eligibility will increase participation. Companies operating on a calendar fiscal year are not required to file 2025 returns until May 15, or Nov. 15 with an extension. While eliminating the CHESLA limitation marked a significant policy shift, observers say other factors may still be discouraging businesses from using the credit.

Financial help

The program was designed to help employers address the financial strain of student loans, which represent one of the largest categories of consumer debt in the U.S., totaling more than $1.6 trillion across more than 42 million borrowers, according to the U.S. Department of Education. That debt burden carries workplace implications. Business groups and workforce analysts point to research showing that student loan debt influences job acceptance and retention decisions for many workers, especially younger professionals. In theory, the credit gives Connecticut employers a way to offer student loan assistance as a recruitment and retention tool while offsetting part of the cost through tax relief. Under the program, eligible employers that make payments on qualified employees’ student loans may claim a credit or refund equal to 50% of those payments, up to a maximum annual benefit of $2,625 per employee. Qualified employees are Connecticut residents who earned their first bachelor’s degree within the previous five years, work full-time, and are not an owner, member, partner or family member of the employer. Businesses are required to file an application with DRS to receive the credit or refund.

‘Too complicated’

During the HBJ interview, Lamont offered a possible explanation for the program’s lack of use. “I think maybe it’s too complicated,” he said.

Chris Davis, vice president for public policy with the Connecticut Business & Industry Association, agrees with that assessment. CBIA members report that the credit can be “a little bit burdensome” to calculate and claim, Davis said, citing the administrative work required to document payments, determine reimbursement amounts and complete the application process. Davis also said some companies already assist employees with education costs, but in ways that do not qualify for the credit. “So either they made direct payments to colleges and universities for tuition that wouldn’t qualify under this (program), or the types of loans that their employees may have may not qualify for this credit,” he said. The state law requires businesses to make payments on behalf of employees to loan servicers, not directly to a school. Eligibility rules present another barrier. Only C corporations may claim the credit, excluding pass-through entities such as S corporations — a structure widely used by smaller businesses. “Last year, CBIA championed a bill to try to have this apply to pass-through entities,” Davis said, noting that most Connecticut businesses are organized that way. That legislation — House Bill 6884 — cleared two committees without opposition but was never raised for a House vote. Davis said the potential cost of the tax credit was an issue. “It’s just a matter of dollars and cents when it comes to how much money they’re willing to put towards this credit,” he said. “Once you open it up to pass-through entities, a larger number of employers would have access to it.” State law, though, caps the credit at $10 million annually, a tiny fraction of Connecticut’s overall two-year, $55.8 billion budget.

Poor promotion

Labor attorney Patrick McHale, a partner at Hartford-based law firm Kainen, Escalera & McHale, said the program’s lack of use may stem from a simpler problem: awareness.

“I honestly don't think it's very well known,” McHale said. “I don't think the state's done a very good job promoting it.” Even when employees qualify, McHale said, student loan assistance is more likely to be initiated by workers than employers — something that can’t happen if neither party knows the credit exists. “I really think the state just needs to make an effort,” McHale said. “The state makes an effort at letting people know about all the paid leave they get, so why not make some time to promote this?”