Re: Student Loan Interest

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You asked why you cannot write off more than $2500 a year in
student loan interest. The logic of your question is spot on,
for you made an analogy to mortgage interest, which is also
deductible, explaining that if you were not paying on this
student loan debt you could be paying on mortgage.

The reason for the limit is that interest paid by individuals
for personal expenses is not allowable as a deduction as a
general rule. Interest on loans for personal expenses is not
deductible because those costs are considered an extension of
the personal items for which the money is used. If I purchase
deodorant on my credit card the interest is not deductible. If
I purchase wine on my credit card, the interest is not
deductible. If I purchase a couch financed by the furniture
store, the interest is not deductible.

This general rule would apply to home mortgages AND to all
student loan debts but for the exclusions to the disallowance
rules for personal interest. These are specific policy goals
that Congress has implemented through the tax code. They
(although some would argue with this) do not implement a
principle of tax logic; therefore, they are not consistent
between exclusions. Mortgage interest deductions subsidize
home purchases. Student loan interest deductions subsidize
student loans. Congress has limited those subsidizes with the
limits on the allowable deductions.

(Actually, the student loan interest deductions are a subsidy
on top of a subsidy since many student loans are already
subsidized by the government.)

Good luck!