House bill would expand student loan interest tax deduction

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The cost of college continues to simmer as an educational policy and legal issue, particularly when it comes to student loans.

Democratic attorneys general from 18 states and the District of Columbia on July 6 filed a lawsuit against Education Secretary Betsy DeVos and her department to stop her from changing rules that erased the federal student loan debt of those who were cheated by colleges that acted fraudulently. Consumer groups also have joined the litigation list.

The Obama Administration finalized the so-called borrower defense rules last October. They were scheduled to take effect on July 1. DeVos, however, froze them, citing a federal lawsuit filed in May seeking to block the loan relief.

Expanded student loan deduction: Meanwhile, as the fraudulent loan issue plays out in the courts, a group of Representatives has introduced legislation to expand a tax break for students who obtain college loans.

H.R. 3048, also known as the Student Loan Interest Deduction Act of 2017, is sponsored by Reps. Eric Swalwell (D-California) and Ron Kind (D-Wisconsin) to address, according to the announcement of the bill’s introduction, “the growing student debt crisis that affects more than 42 million borrowers in the United States.”

The bill would increase the above-the-line student loan interest deduction from the current $2,500 to $5,000 for single taxpayers or $10,000 where a married couple files a joint tax return.

The Student Loan Interest Deduction, or SLID, Act also would eliminate income phase-outs, which currently are adjusted annually for inflation, that tend to limit the deduction’s use by people who live in high-cost areas. For the 2017 tax year, the college loan interest claim is reduced when a single taxpayer’s modified adjusted gross income hits $65,000 or joint filers’ MAGI is $135,000.

Twenty-two of Swalwell’s and Kind’s Democratic House colleagues joined them as original cosponsors of H.R. 3048, which is pending in the House Ways and Means Committee.

Old issue, new constituency: The effort to provide added tax help to those who take out student loans is not new. Similar legislation was introduced in prior Congressional sessions by former New York Democratic Rep. Charles Rangel.

This time, however, Swalwell and the bill’s supporters hope that increased attention on the cost of college will lead to the bill’s enactment, either as a free-standing measure or as part of any overall tax code reform.

In addition to the DeVos/Department of Education lawsuits, college cost was a major issue last year, particularly during the Democratic presidential primaries.

Since November, Swalwell has continued to focus on student loan debt, which consistently ranks high on the list of millennials’ concerns. Swalwell is the founder and chair of the Future Forum, a group of 26 young House Democrats focused on that generation’s issues.

“For too many Americans, college costs too much. And for those who get to and through college, the crushing burden of debt leaves millions in financial quicksand,” said Swalwell in introducing the SLID Act. “The current student loan interest tax deduction is a well-intentioned benefit, but it doesn’t do enough…. This legislation lifts some of that weight and puts more money in more pockets to help people start a family, buy a home, and turn a good idea into a business.”

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Source: http://www.dontmesswithtaxes.com/2017/07/house-bill-would-expand-student-loan-interest-tax-deduction.html

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