Olivia Teixeira worries the proposed elimination of the student loan interest deduction in the federal tax code will hurt her after graduation when she gets a job and starts paying off her college education.
Teixeira, a sophomore at Saint Anselm College, spoke Friday at a roundtable discussion led by Sen. Jeanne Shaheen and organized by the New Hampshire College and University Council.
“I’m hoping to raise awareness to students because I didn’t really know that this was happening,” the second-year student from Attleboro, Mass., told the Monitor. “They don’t know how greatly this will impact them.”
“And I think that this is one of those things that we really need to survive on our feet,” she added.
The gathering, hosted by the New Hampshire Institute of Politics at Saint Anselm College and attended by leaders from the state’s universities and colleges, was held one day after U.S. House Republicans unveiled their sweeping tax cut and reform legislation.
A provision in the bill would eliminate the deduction, which can be as much as $2,500 for middle income earners paying back large loan amounts.
“We know we have about 80,000 families in New Hampshire who take advantage of this tax deduction on interest for college loans,” Shaheen said in an interview with the Monitor. “So we think it’s going to have impact here in New Hampshire where we pay the highest student loan debt in the country and we’re third in the country in terms of the numbers of students who have student loan debt.”
Under current rules, borrowers may deduct up to $2,500 in interest paid toward qualifying federal and private student loans. And it’s considered an “above-the-line” deduction, meaning it directly reduces a person’s taxable income. Current rules also allow a person to claim the deduction without having to itemize.
The deduction phases out for individuals with a modified adjusted gross income of $65,000, or $130,000 for married couples who are jointly filing their taxes. Individuals making $80,000 or more and married couples with a combined income of $160,000 or more may not claim the deduction.
In 2015, the average amount of student loan interest was roughly $1,100, saving someone in the 25 percent tax bracket around $275, according to Internal Revenue Service records.
House Republicans, in their tax plan summary, rejected the argument that scrapping the deduction and other education tax savings would make it tougher for students to afford college, saying that their overall proposal “makes it easier for families to use tax benefits toward the cost of education.”
But Shaheen, a two-term Senate Democrat and former Granite State governor, disagreed.
“This is a big issue. Anything we can do to reduce student loan debt is important because we don’t want kids to be saddled with those debts so they can’t start a family, get the job they want, buy cars, buy homes, and this is something that we think is going to be an even further deterrent,” said Shaheen, who supports bipartisan tax reform but opposes the elimination of the deduction. “I’m hopeful that we can change this provision in any tax reform package.”
Mike Vlacich, president and CEO of the New Hampshire College and University Council, also raised a warning.
“If you take into account that we have the highest student debt load in the nation, and students are going to lose this tax deduction, it could be really difficult for students who are already struggling to make ends meet,” he told the Monitor.
Vlacich, a former state director for Shaheen, said he hoped the roundtable discussion would “make people aware of the very real consequences, especially in New Hampshire.”
Gov. Chris Sununu on Thursday called the House GOP tax reform plan “a very good step in a positive direction.”
But New Hampshire’s first Republican governor in a dozen years added that “I will continue to carefully review the details to see how it impacts Granite State taxpayers.”
The Monitor reached out to the governor’s office on Friday for Sununu’s reaction to the proposed elimination of the student loan tax deduction. But aides to the governor passed on providing a response.