President Barack Obama's recent call for action to prevent an increase in student loan interest rates has sparked a national discussion about the true cost of higher education. Now stories of jobless graduates trapped under piles of mounting student loan debt headline newspapers throughout the country. At a time when college needs to be more affordable, it is becoming harder to pay for. That is why I have introduced the Student Loan Interest Deduction (SLID) Act with Congressman Jim Gerlach (R-PA).
The bill would cut taxes for students by allowing them to deduct up to $5,000 a year ($10,000 for couples) on their student loan interest for a period longer than five years. This would help ease the encumbrance that the tax code currently places on students who are less able to pay off their debt than students of years past.
The current structure of the tax code makes it unnecessarily difficult for students to pay back their loans. Right now, students can only deduct $2,500 - whether single or married - from their federal taxes on the increasing amount of debt that they have accumulated. In addition, students are only allowed to use this deduction for five years before they are forced to pay the full tax rate on the growth of their student loans. This is woefully inadequate to meet the modern challenges of the student loan crisis.
National estimates of outstanding student loan debt place the total at $870 billion. This is more than Americans, as a whole, owe in credit card debt ($693 billion) and auto loan debt ($730 billion). The national amount of student loan debt has rapidly increased in recent months where other forms of consumer debt have declined or remained flat. One-quarter of student loan borrowers owe more than $28,000 in debt - a number that is on the rise. Trends like these led Moody's Analytics to predict that "many students will be unable to service their loans as income growth falls short of borrowers' expectations."
Today's students are the engines of our nation's future. They are the ones who will bear the brunt of challenges that America faces in the long term. A college degree gives them the opportunity to succeed and contribute to the economy. We should make college more affordable so that our country remains globally competitive in the 21st century. That is why Congress must pass the SLID Act - to preserve the American promise for our children and our grandchildren. The future of our nation depends on it.