Student debt is an issue that many younger Americans will have to deal with at some point in their life. With the recent passage of the Republican Tax Cut and Jobs Act (TCJA) last December, students all across America will be affected in some way from the interest on student loans, expanded opportunity, and tax credits.
Starting with the interest students pay on their debt, the TCJA has nothing within the text of the bill that will affect the rate of the interest students pay off their debts, according to Adjunct Professor of the Lorain County Community College’s Business Division, Leroy Meadows. “Interest may see an increase in the future but that would not be a result of the Tax Cut and Jobs Act and more of other market forces”, stated Meadows. This can affect millions of Americans who have some form of student debt. About four-in-ten adults under the age of 30 have student loan debt, according to the Pew Research Center.
One way the TCJA can help students save money is continuing the American Opportunity Credit which is a tax credit that is for students completing four years of undergraduate work. This credit can offer up to $1000 which is completely refundable, meaning students can receive more money on their tax returns when they file their taxes. Meadows is particularly excited that the TCJA is continuing this tax incentive because “keeping that credit is very helpful to a lot of people because that is a deduction to what your taxable income will be”.
Other tax credits that Mr. Meadows recommends that students look into are the Lifetime Learning credit, which is an alternative to the American Opportunity Credit and 529 saving programs. Other than what has previously been mention, majority of the rules and regulations affect student’s income will be similar to that of years prior.
It is important to remember that students may also be eligible to preexisting benefits not mentioned due to their circumstances. The Tax Cut and Jobs Act, just like other tax plans before it, will affect every student differently and it is impossible to actually predict have much a person is affected by the tax cuts without consulting a tax professional.
“There is a lot more things staying the same then are changing,” said Meadows.
The income brackets will be lowering lightly with can allow students more opportunity to the fruits of their labor and taxes.
With credits like the American Opportunity and Lifetime Learning available, as well as saving plans like the Ohio 529, there are a few new and many continuing opportunities for students to get more of their hard earned money.
For more information, consulting a tax professional is the best way to measure the effects of the recent tax cuts.