Monday, July 29, 2013

Tax Consequences Faced By Students

Dana Lime, over at NerdWallet, just published a study on the tax consequences faced by students as a result of the Senate's new bill on student loans. This study is worth sharing with all of you.

The Nerdwallet study found, according to Lime the following: 

  • [First], while the Senate has approved lower rates on student loans at 3.86% for the next few years, on average students will lose 25% of their higher loan costs in taxes because the IRS currently limits student interest deductions to $2,500 a year. This limitation is even more egregious for future students borrowing at higher rates linked to the 10 yr treasury note.

NerdWallet's [Other] Key Findings:

  • A student who borrows at 3.86% will lose $530 in lost tax benefits over 10 years because of IRS interest deduction limits
  • A $500 increase in the limit could collectively save students up to $950 million over 10 years
  • Current IRS rules hurt future students who will pay more interest than current students
  • IRS income restrictions penalize higher income grads who are ineligible for the deduction




Strelnikov said...

It's all just moving deck chairs on the Titanic....the student loan load is unmanageable as it is; playing with the interest rates won't get rid of that trillion-plus.

Anonymous said...

Amen to the commenter above!! We're a sinking ship!