Why is there a phase out for student loan interest?

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jcw
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Why is there a phase out for student loan interest?

Post by jcw » Mon Feb 03, 2014 3:22 am

As I'm in the process of paying off student loans, I've been finding a lot of "gotchas" regarding very screwy policies with student loans. First, student loan interest rates are excessively high (~7%). On top of that, I just learned that there is a phase out for deducing student loan interest. I paid a portion of my loans with a HELOC, which has much better interest rates (3%) and no phase out for deduction.

Question: Why are student loans deductions phased out when most other interest (mortgage, heloc, margin) have no phase out? Seems like younger folks with mountains of student debt are [being taken advantage of --admin LadyGeek]. I have 2 graduate degrees, one of which is from an Ivy league, and a six figure income but it's still challenging for me to make ends. It's actually unbelievable to me that a 22 year old with 4 years of private school loans can even survive these days.

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CMartel2
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Re: Why is there a phase out for student loan interest?

Post by CMartel2 » Mon Feb 03, 2014 9:37 am

Why are there any limitiations on any of these deductions? Especially on those who pay the most taxes?

Earned income credit?
Child credit? Yes, certain children are more valuable than others.
Student loan interest? And why limited to a mere $2,500?
T-IRAs?
Childcare credit?

The answer is purley political, which takes it out of bounds for these forums.

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White Coat Investor
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Re: Why is there a phase out for student loan interest?

Post by White Coat Investor » Mon Feb 03, 2014 9:42 am

It's a vast conspiracy against physicians.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

mlipps
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Re: Why is there a phase out for student loan interest?

Post by mlipps » Mon Feb 03, 2014 10:10 am

The mortgage interest deduction IS phased out, just at a high enough income level you don't normally hear about it. And a margin loan is a pretty obscure deduction I would say, so I don't see the comparison as being very apt. I don't know if that is phased out eventually as I'd never heard of that deduction before you mentioned it.

Overall though, I would say that the reason the student loan interest deduction phases out is just like any other: maximize political gain while minimizing loss to revenues. Sorry, but I have a hard time feeling bad for anyone w/an income high enough not to deduct their student loan interest, especially since the deduction is capped at $2,500 anyway.

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LadyGeek
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Re: Why is there a phase out for student loan interest?

Post by LadyGeek » Mon Feb 03, 2014 11:07 am

This thread has run its course and is locked (general rant, political). See: Forum Policy
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