Under the current tax laws, the deductible amount for interest paid on student loans is capped at $2,500 and the deduction is phased out between $60,000 and $75,000 in MAGI. In contrast, a person may deduct interest paid on home loans for up to two homes: a main home, and a vacation home. The only limitation is that the interest can only be on the first $1 million in mortgage value. Hence, based on tax policy, the Federal Government encourages a person to buy up to two houses, with a total value of about $1 million. Hence, Tax Policy Favors Buying Two Houses as Opposed to Investing in Education. Recent graduates with decent income, that rent, and have no dependents are in a high tax bracket, can't even deduct the interest they pay the government on the loans but also pay tax on it.
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