Question:
About four years ago, I received a bachelors degree and incurred about $35K of debt. Thanks to the IRS, I cannot write-off the interest for these loans. My question is: is there any creative way of working this debt and its associated payments (>$400/month) to my advantage? How about: Re-fi the loan so that the interest is tax-deductible. Of course, you might have a higher interest rate .. As an aside, the loan we are talking about is subsidized by the taxpayer.

Naturally, as a student-type also, I am jealous of folks who don't have to take out said student loans. I'm quite grateful that there *is* a program such as Student Loans that I can use. I wish I could borrow more. I would be happy to be out all the sooner making payments on a student loan off of an adult-sized paycheck. If the $35k of debt is not (entirely) government subsidized, then above pontification is, of course, not applicable. The question is then, whether interest should or should not be tax deductible. My view is that *any* deduction for interest that is not in the pursuit of making money (ie. a purchase of consumables) is a tax subsidy anyway.

Answer:
About four years ago, I received a bachelors degree and incurred about $35K of debt. Thanks to the IRS, I cannot write-off the interest for these loans.

How about: Re-fi the loan so that the interest is tax-deductible. Of course, you might have a higher interest rate ..

My question is: is there any creative way of working this debt and its associated payments (>$400/month) to my advantage?

What is the interest rate?

(A) If you are talking the 7% type loans, pay them off as slowly as possible. Take any extra money you have and invest it elsewhere rather than pay off early.

(B) If it is the 9% type, try making some extra payments on the debt until

(1) either prevailing interest rates are higher - then see above strategy

(2) or the debt is paid off You can't deduct the interest not no how, not no way.

How about: Re-fi the loan so that the interest is tax-deductible. Of course, you might have a higher interest rate

This only works if the starving, in debt student also happens to have equity in a home. As an aside, the loan we are talking about is subsidized by the taxpayer. Naturally, as a student-type also, I am jealous of folks who don't have to take out said student loans. I'm quite grateful that there *is* a program such as Student Loans that I can use. I wish I could borrow more. I would be happy to be out all the sooner making payments on a student loan off of an adult-sized paycheck. If the $35k of debt is not (entirely) government subsidized, then above pontification is, of course, not applicable. The question is then, whether interest should or should not be tax deductible.

My view is that *any* deduction for interest that is not in the pursuit of making money (ie. a purchase of consumables) is a tax subsidy anyway.

My question is: is there any creative way of working this debt and its associated payments (>$400/month) to my advantage?

The best thing about my student loans is the peace of mind it gives me. Sounds crazy doesn't it? But I don't worry about inflation in the least. The U.S. government can inflate it and my loans away any time. I used to worry about inflation far too much. I guess it is my German heritage. :) Seriously, the only way to take advantage of your situation is to use it as an excuse for letting your friends pick up the tab at your local hangout. You could refinance your loan to make your payments smaller, but you'll pay more in interest in the long run. Or you could teach in the inner city and get your loan partially forgiven. Or you could go to grad school like me and get a repayment deferment.

Take out a home equity loan, pay off the debt, and deduct the interest on the h-e loan? Provided the after tax cost of the home equity loan is lower than the student loan. Make sure that (1 - T)*H is less than S, where H: is the pre-tax annual interest rate on the home equity loan S: is the annual interest rate on the student loan T: is your marginal tax rate (15% or 18% or 33%)