<p>2012 was the first full year of my son paying back his subsidized stafford and perkins loans. His interest rates were 4.25-5.35%. I paid the one at 6.8% off as a graduation present (it was the the highest rate and the lowest loan amount $3500</p>
<p>His total interest for 2012 was a little over $1000. Imagine my surprise when I found out that because he made too much money, his interest deduction was limited. Oh come on Uncle Sam. Here's a kid who is making good money and his first full year of working pulls in $70K and you won't give him a $1000 deduction?</p>
<p>His state and local (NY, NYC) taxes are so high that he actually was able to itemize his deductions because they were higher than the standard deduction for a single person.
$ 6,873 vs $ 5,950</p>
<p>I'm all for paying 'our fair share' but these were all federal loans and he isn't able to refinance to the current student loan rates (3.6%) which is STILL higher than my mortgage interest.</p>
<p>Sue…do you have enough equity to take out a loan and pay off the college loan with that money? Your son could then pay YOUR loan payment.</p>
<p>At $70K per year, he is not eligible for any reductions at all in his federal loan repayment. Now, if he were low income, he could have his payment adjusted to reflect his salary.</p>
<p>Congrats to him for getting a good paying job! So many are under or unemployed.</p>
<p>I have enough cash to pay them off, but I know my son and if he knows it’s paid off, I might have a harder time getting him to sign over his tax refund to me. I’m trying to teach him a lesson :-)</p>
<p>As it is, I do his tax returns and they are put in my account (and I pay the loans from that)</p>
<p>He’s having a wonderful life, travelling, jumping out of a airplane and toughmudder competition (look it up!).</p>
<p>However, the amount determined above is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return)</p>
<p>Consider what is often said to those who complain that the middle class makes “too much” to qualify for significant amounts of financial aid - would he rather have the income that makes him qualified?</p>
<p>He got his education, and has a reasonably high paying job. Many students who recently graduated don’t have jobs, or settled for much lower salaries. Many of the lowest income students had enough loans to qualify for the earned income credit, but never benefitted from the full amount because their parents’ houshold incomes were low enough they didn’t have tax liability, and were limited to the 40% refundable portion of the credit.</p>
<p>Most tax credits phase out as income increases - that’s the way the system is designed. Dollar for dollar, he’s still better off with the better paying job.</p>
<p>401K or IRA constributions (or HSA if his company has one) can be made until April 15th to count toward this year - reduce that AGI, and he is still in the range to possibly claim the credit.</p>
<p>If you are helping pay them, and you cosigned, you might be able to claim them instead.</p>
<p>That’s not as much of a surprise as some loan-payers get. If a student ends up paying 25 years on a payment plan other than standard 10-year repayment (it’s 20 years for PAYE repayment) and debt is forgiven, the amount of debt forgiven is taxable in the year it’s forgiven. This can be a whole bunch of money, and it really catches folks by surprise.</p>
<p>(For public service forgiveness, the forgiven balance is not taxable - for all other forgiveness, it is.)</p>
<p>Screwed after you’re done paying for college? i don’t ubderstand OP’s logic, since it doesn’t appear that the student’s debt is paid off, and if so, they are not done paying for college. The government has already given the student a no interest loan during their college years. That isn’t generous enough?</p>
<p>Why shouldn’t an unsecured student loan have a higher interest rate than a mortgage secured by land and property? Makes perfect sense and is fair.</p>
<p>My oldest daughter worked 2011- 2012 school year for a private school that did not pay her for the last five months of her contract (she taught every day anyway) and then declared bankruptcy. Turns out that they withheld income taxes for her January through March (when she was paid on March 30 for what they had owed her since November of 2011), and did not submit those withholdings. </p>
<p>So now she gets to pay the taxes a second time. As a public school teacher she now earns about half of your son’s salary. She paid well over $3K in student loan interest last year, but that is more than the deductable amount.</p>
<p>To complain about a pretty small amount of money in a world where so many college graduates have no job or are vastly underemployed is pretty sad.</p>
<p>Unless the IRS has changed its rules, she should be able to show to the IRS that the money was withheld from her paycheck and not be liable for those taxes. This is why the IRS goes after the “responsible parties” at the employer personally for the taxes that should have been paid, but weren’t. From your description, it sounds like she was not paid anything thereafter and would obviously not owe taxes on income she was promised, but did not receive.</p>
<p>Student loans is one of the few things that the Gvt does right. Appreciate the nobility of the student loan and stop complaining about tax deductions!</p>