It appears that along with reducing taxes on rich people (those making more than $250,000 per year), allowing the Bush tax cuts to expire at the end of the year is going to have a bunch of other interesting effects, including:
"The student loan interest deduction will be disallowed for hundreds of thousands of families." I have never paid any attention to this, because it has been decades since I have paid student loan interest, but my daughter tells me -- and
what I can find poking around -- tells me that a lot of Obama voters are going to be in for a rude awakening on this subject.
You may be able to deduct up to $2,500 of the interest you paid on
student loans on your federal individual income tax return. The
deduction is not limited to government-sponsored loans, but does not
apply to loans made to students by family members. The Tax Relief Act of
2010 extended the student loan deduction through 2012. After 2012, the
deduction will revert to a previous tax law in which interest on a
student loan is deductible only for the first 60-months of repayment.
This only applies to those who are middle class and below. The
TurboTax website explains that you only get to deduct this if:
Your modified adjusted gross income* is less than $75,000($155,000 if filing joint return).
Which means a lot of Obama voters -- people that bought into Obama's "soak the rich" rhetoric -- who have been able to deduct the first $2,500 of student loan interest from their federal income taxes -- are going to lose that deduction if they are more than five years into their loans. Even more worrisome is that many who have been taking this deduction for the last several years, and have adjusted their tax withholding because of this, will discover that this is no longer the case when they do their 2013 taxes early in 2014. But since many of these are low-information voters, when Obama blames Bush for this, they will believe him.
It is disgusting that student debt is non-dischargeable in bankruptcy.
ReplyDeleteIn the ad bar to the right:
ReplyDelete"Obama Loan Forgiveness.
Get rid of your annoying student loan!"
Low information indeed.
They may be low information voters but they will get an education in April
ReplyDeleteObama can blame Bush all he wants. Bush is not running for any office and apparently no other Republican is either. From here after, Obama may not own any of the woes he is inflicting on the public, but the public owns him. You voted him in guys, live with it.
ReplyDeleteIt says a lot about our society that many kids with 5+ years of student loans remain 'low information' voters. It says a lot about our universities and our youth - and it doesn't say anything good.
ReplyDeleteThere is a reason that you can't discharge student loan debt in bankruptcy. The problem was that most students were obviously bankrupt as soon as they graduated from college: no assets, enormous debts. The theory behind making this non-dischargeable was that this was a forseeable consequence of taking on the debt. I believe the recent changes in the law allows it be discharged after 20 or 25 years.
ReplyDeleteThen don't give loans to students without a business plan. That is, if the gender studies major can't think up a scenario where he or she, or he and she, can't pay off the loan, the banker doesn't give the loan, thus saving the applicant an immense amount of suffering. Perhaps engineering or business majors might be able to present a more believable route to making good ontheir debt.
DeleteThis isn't likely to affect many people. Anyone making less than $75K probably isn't itemizing deductions, and therefore wouldn't be taking the deduction, anyway. Deductible student loan interest is just one of many, many ways politicians use the tax code to dupe people into thinking they're getting something besides screwed.
ReplyDeleteStudent loan interest is an above-the-line deduction, meaning it is subtracted from gross income to arrive at adjusted gross income. Itemized deductions, like mortgage interest, etc., are below-the-line deductions, meaning they are subtracted from adjusted gross income to arrive at taxable income. In short, you can take the standard deduction and also deduct student loan interest (as long as you make less than $75k as an individual filer).
DeleteYou really think Obama voters will notice this? They don't pay attention to, or understand most other economic and fiscal issues. Why would this be different? To the extent they notice, I'd expevt them to blame Bush or the Republican House solely.
ReplyDeleteActually, once you get away from the coasts, people making less than $75,000 a year buy houses, so the student loan debt and the house mortgage interest justify Schedule A itemization.
ReplyDeleteYou get what you vote for. The students voted for Obama because he was cool to vote for.
ReplyDeleteSuckers!
You do not have to itemize to deduct student loan interest.
ReplyDelete"I believe the recent changes in the law allows it be discharged after 20 or 25 years."
ReplyDeleteUnder some circumstances, I think this is true, but I have read that the debt that is discharged counts as taxable income.
" I believe the recent changes in the law allows it be discharged after 20 or 25 years."
ReplyDeleteNo, student loan debt is only dischargeable if you can show that there is no way that you would ever be able to make significant payments on the debt. Essentially this means you would have to show substantial permanent disability.
Arrgguh, that last comment did not edit right.
ReplyDeleteStudent loan debt can be forgiven after 25 years, Obama's proposals to reduce that to 20 years are caught up in budget negotiations. However, if you've not made enough payments in that period, you don't qualify.
Meanwhile, there is only dischargeability for a permanent inability to pay as mentioned above.
Funny how people who have no clue about filing/paying taxes post on articles like this.
ReplyDeleteThe comment about a "business plan" is painfully true. I would argue that the amount of tuition that you pay at a public institution should be related to the percentage of graduates with your intended degree that get a job in that field within a year of graduation. Degrees that lead to jobs will pay for themselves in increased income taxes paid to the government; gender studies degrees are primarily for the edification of the student, and deserve a much smaller government subsidy.
ReplyDeleteTo the very first commenter:
ReplyDelete"It is disgusting that student debt is non-dischargeable in bankruptcy. "
Why, exactly, is it disgusting?