- Days left

Want to stimulate the economy? Increase student loan tax credits

While I can appreciate the stimulus package's focus on "shovel-ready" projects and I can even understand some of the rationale behind propping up banks, I feel that the administration missed a huge opportunity to help out a large portion of our population -- people with student loans. All of new legislation regarding student loans has focused on making relatively small amounts of funding available to incoming students disregarding the huge population of 20- and 30-year-olds who are still making mortgage-sized payment to lenders like Sallie Mae.

The housing credit may be helpful to this age group but despite the benefits to owning a home in the current economy many graduates are sending more money to Sallie Mae than they can afford to commit to Fannie Mae. The government has an excellent opportunity to help out responsible borrowers without writing off any student loan debt by raising the amount of interest that can be claimed under the Student Loan Interest Deduction (IRS Publication 970, "Tax Benefits for Education.")
Currently graduates can only deduct the first $2,500 of student loan interest paid in a given year, but with the increased debt load of recent graduates many, including myself, end up with plenty more to deduct. Even if the only change would be to up the amount of tax credit a married couple could receive to $5,000 it would provide significant benefits. The additional $2,500 may not be enough for a down payment but it could help young people increase their savings or make an economy stimulating purchase like a first house.

With all the focus on how to fix student loans for students who will be in college in 2010 it seems that the administration has forgotten about the students who are already diligently paying back the cost of their education. Small steps like an increased tax credit can provide positive re-enforcement for these individuals while decreasing the default rate and negating the need for a full on student loan bailout in a few years.

Increase your money and finance knowledge from home

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

What is Inflation?

Why do prices go up?

View Course »

TurboTax Articles

Top 5 Reasons to Adjust Your W-4 Withholding

Common lifestyle changes, like getting a job or getting married, can change your tax liability. To avoid being caught off guard by an unexpected tax bill or huge tax refund, you'll need to adjust your withholdings on your paycheck.

Does Everyone Need to File an Income Tax Return?

Not everyone is required to file an income tax return each year. Generally, if your total income for the year doesn't exceed the standard deduction plus one exemption and you aren't a dependent to another taxpayer, then you don't need to file a federal tax return. The amount of income that you can earn before you are required to file a tax return also depends on the type of income, your age and your filing status.

How to Write Off Sales Taxes

The Internal Revenue Service (IRS) permits you to write off either your state and local income tax or sales taxes when itemizing your deductions. People who live in a state that does not impose income taxes often benefit most from this deduction. However, you might also be better off deducting sales taxes instead of income taxes if you make large purchases during the year and your total sales tax payments exceed those for state income tax. You can use either the actual sales taxes you paid or the IRS optional sales tax tables.

Add a Comment

*0 / 3000 Character Maximum