Tax Deduction for Students Now Will Pay Dividends
U.S. Rep. Charles B. RangelThe Honorable Charles B. Rangel is serving his 22nd term as the Representative from the 13th Congressional District, which stretches from upper Manhattan to northwest Bronx. A founding member of the Congressional Black Caucus, he made history as the first African American member of Congress to lead the powerful House Ways and Means Committee. He is a member of the Joint Committee on Taxation.
I am pleased that the President’s FY14 Budget addresses the student loan crisis in our country. From leading the world into the age of democracy to spearheading the technological revolution, America has always been at the forefront of greatness.
This has not been the result of luck or destiny, but because we created an environment that fostered creativity and nurtured brilliance. It is this environment that we risk destroying if we turn our back on our education system and leave students to carry huge debts just to afford higher education.
My bill, the Student Loan Interest Deduction Act of 2013, takes an important step in the right direction by making college a little more affordable. Today the price of a college education is increasing at roughly double the rate of inflation. Combined with wages that are stagnating and persistent unemployment, heightened cost of higher education makes it more difficult to pursue now than even five years ago.
Since most American students cannot simply pay their full tuition out of pocket, financing a college education often takes the form of loans, both private and from the government. At the end of 2012, the total amount of student debt in America had already topped $1 trillion, which surpassed the total outstanding credit card debt at $799.5 billion and the auto loan debt at $783 billion. Total student loan debt is estimated to increase at a rate of $2,853.88 per second. A typical student owes $26,700. Ten percent of 2012 graduates who had to borrow for school owe more than $63,000. Thousands of young men and women are choosing to forgo college rather than incur such debt because they fear the cost of education will hold them back more than the education itself will lift them up. Unfortunately, for many this is true.
Should we wish to continue being the leader of the global economy, then this problem must be fixed. If enacted, the SLID Act would double the maximum deduction for student loan interest to $5,000 for individuals and $10,000 for married couples. It would also eliminate the current income cap.
With major tax reform on the horizon, it is critical that we do not forget why we need reform. We all want a simpler code, but tax reform is about much more. It is about ensuring that everyone pays their fair share. The tax code is also used to promote behavior that we as a nation support, such as home ownership or charitable contributions. We need to encourage and support higher education. My bill does this by allowing a larger deduction on student loan interest, thereby alleviating some of the burden students carry to pay off their loans.
A greater tax deduction for students is not a handout. On the contrary, it helps those who are willing to meet the challenges of higher education to invest in our collective future. These students will use the skills and knowledge they gain in college to improve our nation as a whole by enriching and inspiring the communities they live in. They will provide superior products and services, innovate in better ways, and ultimately earn higher incomes which mean they will be able to pay higher taxes while strengthening the local and national economy.
For the United States to remain a superpower in the ever competitive world an educated population is a necessity, not the luxury it may have been in the twentieth century. Nations like China and India are rising fast and will shortly be out-producing us based on sheer numbers alone. Since we will never reach their population levels, the only way we can stay ahead in this new world is to be competitive on the individual level at everything we do. This means that the government has an obligation to create an environment where higher education, which I believe is key to success, is accessible for anyone who seeks it. SLID Act is a sound investment in our future.