In 1997 the deduction for student loan interest came back into play after being repealed in the mid-1980’s. It seems everyone knows someone that owes  six figures for their college education.

What makes this sad is  that even if they found their dream job within the field that they studied, the salary would not constitute the amount of money that they owe. When it comes to borrowing money its not so much the principle that makes it so hard to pay back but yet of course interest makes it disturbing to the borrower, especially when your first starting out in a career

What is the student loan interest deduction

Student loan interest is one of the  unsecured loans that you actually cannot walk away from.  It was less than a decade ago the Internal Revenue Service made a change to the student loan interest deduction. The former rules only allowed you to take the deduction within a certain time after  graduation. Under the current rules the deduction can be taken for an unlimited amount of time after graduation if you are paying interest. You can find the deduction on line 33 of the 1040, they call it an “above the line deduction” which reduces your adjusted gross income.

What can Washington do?

With all of the talk about tax reform, how about we look at things “one at a time”. We have quite a few credits that will actually give you money for somewhat no reason whatsoever. The child tax credit is the government giving away money for having children. Earned income credit is giving money  out to the poor. In one perspective, their is a social responsibility that was considered when these credit came about. Its nice to know the government will assist its citizens when they are in need however for some, their is an incentive to earn just enough and nothing more.

A reasonable solution

The student loan interest deduction  is not a credit its only a deduction. What if we told our children that we, as American taxpayers, are willing to foot the bill for the interest that our youth are paying? . Like the earned income credit, were the government can sometime give over $5000 to individuals depending on how many children they have and what  their income is (always worth a debate), we can give  graduating students the incentive to not be so frustrated when its time to payback their loans. The proposal would be to move the student loan interest deduction to a student loan interest credit. The credit would have phase outs  just like so many other credits and would balance compared to taking a deduction of the interest which only reduces taxable income.  In essence the interest you pay for student loan debt will be given back as a credit and not just a deduction, especially a deduction that might not benefit you.

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One has to assume that in today’s environment, it is a little harder to start a business then let’s say in 2003. Back in the roaring 2000’s (2003-2007 more or less) it seemed like you could purchase a website and a Voice over IP and you were on your way. The real estate market was flourishing….. or so we thought.  Flipping houses was easier than flipping pancakes at IHOP.  I can remember a mortgage broker giving me a loan without needing my financial information.  They called it a “No Doc” loan.  Try that today.

As the World turns

Let’s spin forward 14 years to 2017. We can look at all the economic indicators we learned in college (Consumer Price Index, Product Price Index, GDP…… the list goes on) but what is happening on the ground floor? Well, we know a few things.

  1. Jobs are being consolidated. The value of your service might be shrinking. Today, its very easy to find a website designer or even an SEO person who charged twice as much for their service 5 years ago.
  2. You cannot just create jobs for the sake of creating jobs. Is a small business owner struggling just to make ends meet going to hire someone because its good for the country? Is corporate America going to stop farming their services overseas because they want to see Americans with jobs? Never happen (barring legislation).
  3. Uncertainty is high. Generally speaking,  people do not like uncertainty. Security is paramount. If you can find a job that pays well with matching 401K contributions or a  government pension, you’re on your way to a comfortable retirement.

How do you know starting a business is right for you?

With all of this said, why would someone be so pessimistic about business and the economy. Well, I’m really not. There is only one way anyone can become an entrepreneur and that is if all of these factors do not matter. The risk taker doesn’t care what the job market is doing or where the real estate market is going or even what their pension is going to look like at 65.

Breaking life down

Let’s say you’re 40 years old. You are smack-dab in the middle of life.  If we check the numbers, you have lived about half of your life on God’s green earth.  It just all seems to go so fast.  Are you worried about life and what it looks like at 70, 75 or 80? These are questions you need to ask yourself.  How many years do you think you have left here?

An individual should venture on their own for this one primary reason. You do not want to reach your golden years having regretted not taking a chance.  If you are reading this and are over 65 years of age ( I have at-least 100 clients over 65) the best things you can do is stay healthy, smile and do service to the people who need you.  It is not the wealthiest person in retirement who is the happiest, it’s the person whose finances have become a “moot point.”

Don’t start a business for money.  It’s so much more than that.

For all the Mark Zuckerbergs’ and Steve Jobs’ in the world there are  millions of people who trekked down the road of entrepreneurship only to find out this was tougher than originally expected.  My own story has its stange twist and turns.  I can remember a few years into having started my business, I hit a stumbling block.  That boulder was called “I’m broke.”

A good friend of mine said when help