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Why do students have to pay taxes on student loans?

Are they considered earnings for that year because they are loans or what.

Answer Question
 
lele10000

Asked by lele10000 at 9:39 AM on Mar. 3, 2011 in Money & Work

Level 5 (59 Credits)
Answers (6)
  • Student loans are not taxed.
    Candi1024

    Answer by Candi1024 at 9:41 AM on Mar. 3, 2011

  • I thought you only had to pay taxes on the interest you paid.
    kaylan010

    Answer by kaylan010 at 9:42 AM on Mar. 3, 2011

  • kaylen, you can deduct the interest you paid from your income, so you don't pay taxes on it, you get a tax relief from it.
    Candi1024

    Answer by Candi1024 at 9:43 AM on Mar. 3, 2011

  • Unless you make too much and then you still have to report the interest, but not as a deduction... sorry I was trying to remember.
    kaylan010

    Answer by kaylan010 at 9:50 AM on Mar. 3, 2011

  • They pay interest, not taxes, because it is a loan.
    gemgem

    Answer by gemgem at 10:14 AM on Mar. 3, 2011

  • The ONLY thing that I can think of is that you (or the person you are talking about) got Grants or scholarships in excess of what you needed for school- and then yes you would pay taxes on that because it would count as income.

    So school is $1000, you get $3000 in Pell Grants- you'd pay taxes on the $2000 that didn't go towards school.

    But like the other posters said, if it's student loans you wouldn't pay taxes on it- because when you pay it back you'll be paying it back with after tax money. Hopefully that makes sense.
    Erica_Smerica

    Answer by Erica_Smerica at 8:32 PM on Mar. 3, 2011

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