During the mounting tension surrounding the U.S. Supreme Court's decision on healthcare, an important financial issue had become obscured. Absent action from Congress by today, the interest rate governing student loans was due to double.
Of the 20.5 million college students in America, an estimated 7.4 million students have taken out government subsidized Stafford loans, which means one out of every three students would have been subjected to these increased rates if nothing had been done by July 1st. This increase would have hit students at a time when college tuition has been rising, on average, by 8 percent every year.
Aware of this crisis, Rep. John Lewis decided to use his seniority on the Ways & Means Committee, which oversees the government's use of tax dollars, to offer students an important option. Last week, he introduced H.R. 6010 which allows people to claim a tax deduction of up to $2500 for student loan interest payments they make in one year.
"The rising cost of college tuition," said Rep. John Lewis, "leaves college graduates tens of thousands of dollars in debt. Students who continue to graduate school can be more than $100,000 in debt. The only factor that makes this massive debt even begin to be manageable are lower interest rates and reasonable repayment terms that allow students to stretch out payments well deep into their professional career, when they have higher incomes and a better capacity to repay these loans. Studies have shown the prospect of debt discourages students from pursuing advanced degrees. This bill helps relieve some of the weight of this debt and gives young people and graduate students some breathing room."
Lewis's bill would expand the current income limits so that more middle class families could claim this important tax deduction. Under this bill, single taxpayers earning less than $90,000 and married couples with a household income of less than $180,000 would be able to claim the deduction.
After a high pressure push by President Obama demanding Congress to act, the Republican-led House and Senate passed a one-year freeze that would keep student loan rates at their current level of 3.5 percent.