this post was submitted on 05 Sep 2023
908 points (98.0% liked)
Memes
45725 readers
1069 users here now
Rules:
- Be civil and nice.
- Try not to excessively repost, as a rule of thumb, wait at least 2 months to do it if you have to.
founded 5 years ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
Paying off principal is essentially shifting money from one pocket to another so it doesn't really make sense to get a writeoff for that.
Why? If I am required to pay a certain amount of money back each month with interest and I have absolutely no way to wipe that debt away other than repaying it, why am I also getting taxed on that money as income? I am required to have a degree to earn money and I cannot pay for a degree without federal loans so why am I getting charged twice for them?
The idea is that you were "given" that money when you got the loan and you weren't taxed on the value of the loan when it was provided to yoy, so you can't deduct it when you pay it back.
In at least some parts of Canada, for example, there are tuition credits which you can claim against income taxes later on.
Not really true. You are required to have a degree to have a particular job of your choice. It's up to your government to decide if having that choice is something it wants to encourage, with income tax breaks equivalent to the cost of tuition (the loan principle) or if that is a luxury that is taxed like any other luxury.
The interest on loans is not a tax. It's the expense of accessing capital immediatly. Again, it's up to your government to decide if accessing capital immediatly is a necessity eligible for tax breaks, or a luxury that comes out of your after tax income.
Also don't forget consumption tax which may or may not apply (usually not on loan interest).
Income tax is a tax on everything, basically.
You can buy a house in Canada on a low skill job that doesn’t require a degree and doesn’t destroy your body? You certainly can’t in the US. Your statement is also incorrect in the US because of a flood of entry level folks with degrees. This has been a problem here since the 2008 crash. Jobs that didn’t require a degree ten years still don’t but won’t hire without one because of the hiring pool.
You’re totally right on paper. The real world is not theory though.
you are also only required to breathe air if you choose to carry on breathing as a choice. you can simply stop.
When you pay principal, you are gaining that much value back as equity. It makes more sense if you think of a loan for something physical like a mortgage. If you pay $100 of principal on your mortgage, that money turns into equity that you own in your home so that when you sell you get that much more (in a simplified way).
You aren't losing the $100 you pay in principal, it's just transferring into an asset rather than liquid cash. With a student loan, that asset is your degree/education. It's a little different than a mortgage because the bank can't repossess your degree, but the underlying logic is the same.
You could also think of it like paying for your degree on a payment plan. You wouldn't expect to get a tax writeoff on your couch just because IKEA let you pay in monthly installments.