- 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

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

Basics Of The Stock Market

Stock Market 101 - everything you need to know but were afraid to ask!

View Course »

TurboTax Articles

Video: What Days of the Week Does the IRS Deposit Tax Refunds?

There is no doubt that many taxpayers file their returns before the April deadline so they can get their tax refunds quickly. But remember, the IRS does need some time to process your tax return before it can issue the refund. Watch this video to learn more about when you'll be receiving your tax refund.

Video: Guide to Payroll Taxes

As an entrepreneur, you probably realize that there are some business expenses you just can't control -- like the payroll taxes you have to pay for yourself and each person you employ. Watch this video to find out more about payroll taxes and how they may affect your business.

Add a Comment

*0 / 3000 Character Maximum