Entries Tagged 'Student Loans' ↓

Spring may be the time when a young man’s fancy turns to thoughts of love, but it’s also the time that most people start thinking about their taxes. Taxes are due April 15th this year and this is the time to collect your tax and financial information.

Tax information is hidden in a lot of places. If you work, you should receive a W-2 form from your employer, which will show the amount of money you’ve made; the taxes that have been withheld from your paycheck; any non-taxable income, like retirement savings and medical expense accounts; and other taxable benefits, like extra life insurance coverage.

Your bank should also issue a statement showing how much (if any) interest you’ve accrued on your accounts. If you have mortgage, your mortgage company should issue a statement showing how much mortgage interest you paid during the previous year.

More likely, however, if you’re a student or a recent graduate, you probably don’t have enough “deductions” to itemize your taxes. Even though you don’t itemize, don’t forget to take your student loan interest deduction. The deduction applies only to the interest you’ve paid on student loans - not the loan itself, but you’re eligible to take it (along with the Hope Credit) even if you file the short tax form each year.

Your educational institution should provide a statement showing how much you’ve paid in tuition and fees, and your student loan holders should supply you with information on how much interest you paid during the year. Look for these forms in the mail and set them aside so you’ll have them when you prepare your tax return.

The Hope Credit and student loan interest deductions do have income limitations of $55,000 for single filers and $110,000 for married filers, and you’re only eligible to take the deduction for yourself if you are not a dependent on someone else’s return, so consult the IRS regulations on this deduction before assuming that you can write off all of your interest.

Student loan repayment can have a significant effect on a student’s decision to attend a particular university, study a certain major or accept a specific job. According to a Princeton University study, as little as $10,000 of additional debt can affect a graduate’s decision to take a job in the public service sector.

The lower pay scale of these positions means that many students who would otherwise accept public service jobs shy away, for fear of not being able to manage their student loan debt. Additionally, research shows that students who graduate with no debt are three times more likely to pursue advanced degrees than students who exit their undergraduate studies with student loans.

With the changes adopted by Congress earlier this year when it passed the College Cost Reduction Act, many students are now considering careers in lower-paying sectors because the Act contains provisions that allow for income-based repayment schedules and student loan forgiveness for graduates who take jobs in the public sector. The student loan forgiveness provisions are meant to encourage graduates to take jobs as police officers, teachers in certain areas, rural health care providers, public defenders and other government jobs.

Additionally, graduates can also consider taking lower paying jobs in the private sector, knowing that their student loan payments will take into account their post-graduation income. For some professionals, this reduces the stress of finding a job that pays adequately to cover their student loan obligations.