Back To School: Deducting Interest Paid On Student Loans (even If You Don’t Pay The Loans)

Because rates are starting out very low today, and the variable rate SoFi loan is capped at 8.95%. Having a cap on a variable rate loan can remove some of the risk if youre concerned about interest rates going sky high. And finally, in Scenario #3, where rates only go up a small amount, the variable rate SoFi loan has a better outcome than all of the federal options. Now, this example is really intended to illustrate how variable rate and fixed rate individual situation could vary from above, you can talk to one of our savings consultants to get a better feel for which loan is right for you. The SoFi team is standing by at 1-855-456-SOFI. Views expressed in this post are that of Mike Cagney, CEO of SoFi.

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Education Department Lets Borrowers Default On Student Loans, Ignoring Helpful Alternatives

I paid off my undergrad loans (whew!) but am still paying for law school. To help ease the pain of paying off all of that debt, Congress has made it tax favorable. That hasnt always been the case: beginning in 1986, you couldnt claim a deduction for interest paid for personal reasons (one glaring exception being the home mortgage interest deduction). However, in 1997, as part of the Taxpayer Relief Act of 1997, interest paid for student federal student loan forgiveness loans was deemed to be deductible. For more on the history of student loans, check out this prior post . Today, there is a deduction allowed for paying interest on a student loan used for higher education.

Student-loan providers rapidly dwindling

By Christine DiGangi | 19 hours ago Its easy for someone to say, Follow your dreams they dont have to pay for it. Then again, maybe they could. Piglt (pronounced piglet) is a platform for crowdfunding higher education expenses and student loan debt . Dreamers promote their campaigns, set a fundraising goal and hope to connect with people Believers, as Piglt calls them who want to contribute. But the money doesnt go to the Dreamer. At the end of the campaign, the money raised (minus Piglts servicing fee and third-party payment fee) goes directly to the educational institution or the loan servicer .

Even Ivy Leaguers default on student loans

We’ve got a crisis in terms of college affordability and student debt, Obama said in an Aug. 22 speech at the State University of New York in Buffalo. Our economy cant afford the trillion dollars in outstanding student loan debt, much of which may not get repaid because students don’t have the capacity to pay it. Speaking the next day at another school in upstate New York, SUNY Binghamton, Obama warned that if young people are “burdened with tens of thousands of dollars of debt, in some cases it’s impossible for them ever to pay it off, or they have to put off buying a home, or starting a business, or starting a family. And that has a depressive effect on our economy overall, he said. So it’s not just bad for the students, it’s also bad for the economy as a whole. Regulators have warned that rising levels of student debt risk curtailing consumption and slowing the U.S. economy. Obama has said the debt burden holds back our entire middle class. Chris Greene, a spokesman for the Education Department, said the roughly equal increases in the number of borrowers in default and the number enrolling in debt-relief plans over the past year was purely coincidental. First, borrowers entering default are likely at very different points in their repayment lifecycle than borrowers entering IBR or Pay As You Earn, Greene said.

Crowdfunding for Student Loan Debt?

And of course, no matter how the data is diced, the bottom line for both schools and their students is that they have extremely low defaults compared with the national average for the same period, which is 13.4%, according to the Education Department. At a time when student-loan debt has surpassed $1 trillion and defaults on these loans are rising, students, particularly those from lower- to middle-income families at many high-ranked institutions, have been largely able to avoid these headaches. In many cases, they dont even have to take out student loans. For example, all of the Ivy League universities have no-loan policies, which replace loans with grants and other free aid for at least some of their students who demonstrate financial need. In Princetons case, this happens for all students who qualify for financial need. As a result, just 5% of its more than 5,000 undergraduate students during the 2011-12 academic year were signed up for federal student loans, according to the latest data from the Education Department.

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