Make Student Loan Interest Fully Tax Deductible

If I borrow money to invest in my business, I can deduct my interest expenses without limitation or restriction. It seems only fair and reasonable that a student who borrows to invest in his/her future through education or professional training should be entitled to that same tax advantage.

IRC Section 221 (pursuant to the Taxpayer Relief Act of 1997) provides for deductibility of student loan interest, but there are strict limits. Deductions are capped at $2,500. This limit was established in the 1997 Act, and has never been adjustment for inflation. Further, ability to claim this deduction starts phasing out at $75K in annual income for individuals (and fully phases out at $90K).

A nation’s most precious economic resource is its human capital. This is all the more true in highly developed economies, such as the USA, where financial capital is already abundant. Yet, here we have a tax policy that misguidedly favors financial capital over human capital – one that permits a business to deduct interest expense when it invests in growing shareholder value, yet denies this same advantage to the individual who would invest in growing his/her professional value through education.

Student loan forgiveness is clearly a divisive subject fraught with complicated questions of fairness, moral hazard and practical feasibility. But making interest repayments on student loans fully tax deductible seems like a common sense policy that most people could get behind.

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