If Sen. Rand Paul (R-KY) gets his wish, student loans could soon be fully tax-deductible. Paul says he plans to introduce the Tax Free Education Act, legislation that could change the face of student loan programs forever if passed.
In comments made to WDRB-TV in Louisville, Ky., Paul said his five-prong approach would include the following:
Make education expenses 100% deductible
Enable students to deduct the cost of their education from their income tax
Include student loans as “education expenses”
Apply to all colleges and technical schools
Apply to the cost of K-12 education
The rising cost of education is important to Paul. Less than two years ago, he introduced the Higher Education Loan Payment and Enhanced Retirement (HELPER) Act, a pro-taxpayer plan that he said would help Americans pay off their student loan debt more quickly and easily, plus give them an added opportunity to save more money for retirement.
"Making college tax deductible, I think, would help a lot of families," Paul said. "A lot of families are struggling. College tuition has doubled over the last decade. Loan payments are going up. I meet people in their 30s still trying to pay back their loans."
Student loans: a can of worms
We’re now in the fourth year of a prolonged battle over student loans, dating back to 2017 when a coalition of states pushed Trump Education Department appointee Betsy DeVos to take action on 25,000 loan forgiveness applications filed by students who were left stranded when for-profit schools like Corinthian Colleges collapsed.
After DeVos left that can of worms on her desk for her successor, the new Biden-appointed Education Secretary Dr. Miguel Cardona quickly forgave more than a billion dollars coming from 72,000 eligible claims from student borrowers -- the majority of whom attended Corinthian Colleges and ITT Technical Institute.
That’s a nice start, but there’s still work to do. According to the Education Data Initiative’s deep dive into the situation, there’s still a lot to shore up -- including addressing the variety of loan forgiveness programs that have different qualifications, forgiveness amounts, and qualifications.
Unfortunately, the process of making improvements has been painfully slow. In the last two years, the number of denied claims has more than quadrupled, and as many as 43% of applications have not yet been processed.
What about the for-profit schools still in business?
Another item on Cardona and Paul’s checklist might be to help students who have loans from for-profit institutions that are still in business. As an example, ConsumerAffairs reviewer Marnie from Massachusetts pegged Capella University for the problems she’s been fighting.
“Terrible! They took $82K from me without even knowing about it with student loans so they could profit! I am getting a lawyer against Capella AND Nelnet. If you think after 15 years I am going to pay all of YOUR FRAUDULENT money back when I wasn't even able to graduate after seeing my bill, you're nuts,” Marnie wrote.
Another frustrated for-profit college student loan borrower -- Melissa of Maryland -- says she’s still trying to sort things out with Strayer University. She accused the institution of taking her money but then changing the name of the program she completed.
“Called the dean to advise. Was told he would get it straight. Received a email advising the program was switched to Business ADMIN. from HR. I took out student loans to receive a degree in HR not Business. I could have went to another school and Received the degree I wanted. Now stuck with over 50k in student loans with no job in HR,” she wrote.