If you havent heard, student loan interest is now a tax deductible item on your personal tax return. On August 1, 2005 the cap on the old maximum student loan rate was lifted, and the new one was pushed into effect. So exactly what is going to be the affect on your existing student loan going to be you may be wondering. How will this now change the end result of the parent or students tax return?
A lot of the associations that offer student loans told students that their best bet was to consolidate the existing loans and lock in the new lower interest rate, while it was still available, so that the new rate would affect their upcoming tax returns.
The interest rate of a federal subsidized loan does not have the same huge affect as it does with a private or unsubsidized loan. When obtaining a deferred payment loan, which will also defer the interest payments on the loan, can drum up huge amounts of additional debt for the borrower since the interest actually accrues interest leading to a huge amount of debt very quickly. So this should tell you the huge effect the new law will have on those with student loans.
The government, over a span of the last couple...
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