How Effective Are Student Loan Interest Deductions in Reaching Lower-Income Taxpayers?

• In Event: The Pitfalls and Promise of Student Financial Aid

Abstract

Student loan debt remains an issue of great public concern. Today, college goers are both the most indebted students in the history of the United States and the indebted group with the highest risk of defaulting on their loans. This study analyzes a federal financial aid program that targets student debt holders: The Student Loan Interest Deduction (SLID). Specifically, SLID offers up to $2,500 as an earned income tax break to households paying interest on a post-secondary education student loan. Aligned with the call for “Accepting Education Responsibility” and building on previous research on the analyses of tax benefits from a place-based perspective, the purpose of this study is to assess the effectiveness of SLID in reaching lower income taxpayers.

Author

• Manuel S. Gonzalez Canche, University of Pennsylvania