Last Updated on May 24, 2022

How Much Interest On Student Loans Is Tax Deductible?

Student loan interest is tax deductible, but it’s not as simple as just writing off the interest you paid during the year. You have to itemize on your taxes in order for student loan interest to be deductible. That means that if you take the standard deduction instead of itemizing, then your student loan interest won’t be deductible.

But even if you do itemize, there are still limits on what you can deduct as student loan interest. The IRS only lets you deduct up to $2,500 annually in student loan interest. Plus, if you’re married filing separately or considered a dependent filer by the IRS, then your deduction is limited even further; it’s only $1,500 per year in those cases.

If your total taxable income doesn’t exceed these amounts, then don’t worry—you’ll still be able to deduct up to $2,500 per year in student loan interest. If it does exceed $2,500 though (or $1,500 as a dependent), then you may want to consider refinancing your loans with a private lender instead of making payments directly to the federal government each month so that more of your money goes toward reducing

## How Much Interest On Student Loans Is Tax Deductible

The tax benefits can be used to get back some of the money you spend on tuition or loan interest or to maximize your college savings.

Two tax credits help offset the costs (tuition, fees, books, supplies, equipment) of college or career school by reducing the amount of your income tax:

The American Opportunity Credit allows you to claim up to $2,500 per student per year for the first four years of school as the student works toward a degree or similar credential.

The Lifetime Learning Credit allows you to claim up to $2,000 per student per year for any college or career school tuition and fees, as well as for books, supplies, and equipment that were required for the course and had to be purchased from the school.

Even if you normally wouldn’t file a tax return because of your income level, be sure to do so! If you don’t, you’ll miss out on tax credits that would put money in your pocket.

The term student loan interest deduction refers to a federal income tax deduction that allows borrowers to subtract up to $2,500 of the interest paid on qualified student loans from their taxable income. It is one of several tax breaks available to students and their parents to help pay for higher education. Individuals must meet certain eligibility criteria, including filing status and income level, to qualify for the deduction.^{1}

### KEY TAKEAWAYS

- The student loan interest deduction allows borrowers to deduct up to $2,500 of the interest paid on a loan for higher education directly on Form 1040.
- Eligibility for the deduction includes an individual’s filing status and income level.
- The deduction is capped at the amount paid for those who paid less than $2,500.
- Anyone who pays more than $600 in interest for the year should receive a Form 1098-E from the lending institution.
- Federal student loan borrowers may not have deductions to claim as payments for interest on these student loans were suspended by President Joe Biden through Aug. 31, 2022.

## student loan interest calculator

Simple Student Loan Calculator

Please provide any three values below to calculate.

Loan Balance

30000

Remaining Term

10

years

Interest Rate

6.8

Monthly Payment

/month

Calculate

Result

Repayment: $345.24/month

Total Interest: $11,428.92

Total Payments: $41,428.92

72%

28%

Principal

Interest

Student Loan Repayment Calculator

Use the calculator below to evaluate the student loan payoff options, as well as the interest to be saved. The remaining balance, monthly payment, and interest rate can be found on the monthly student loan bill.

Loan Balance

30000

Monthly Payment

350

/month

Interest Rate

6.8

Repayment Options:

150

per month

0

per year

0

one time

Calculate

Pay off in 6 years and 2 months

The remaining term of the loan is 9 years and 10 months. By paying an extra $150.00 per month, the loan will be paid off in 6 years and 2 months. It is 3 years and 8 months earlier. This results in savings of $4,421.28 in interest payments.

If Pay Extra $150.00 per month

Remaining Term 6 years and 2 months

Total Payments $36,767.26

Total Interest $6,767.26

The Original Payoff Schedule

Remaining Term 9 years and 10 months

Total Payments $41,188.54

Total Interest $11,188.54

Student Loan Projection Calculator

Use the calculator below to estimate the loan balance and repayment obligation after graduation. This calculator is mainly for those still in college or who haven’t started. Before estimating, it may be helpful to first consult our College Cost Calculator to get a rough idea of how much college may cost.

To Graduate In

2

years

Estimated Loan Amount

10000

/year

Current Balance

20000

Loan Term

10

years

Grace Period

6

months

Interest Rate

6.8

Do you pay interest during school years?

Calculate

Result

Repayment: $526.96/month

Amount Borrowed: $40,000.00

Balance After Graduation: $44,263.99

Balance After Grace Period: $45,790.44

Total Interest: $23,234.95

You need to make $45,790 per year or more to repay the loan with less stress.

63%

37%

Principal

Interest

- The “Grace Period” is the period between the date of graduation and the date that repayment of a student loan must begin.
- For some direct subsidized loans, you do not need to pay interest during school years or the grace period.
- This calculator assumes loans to be repaid each month equally right after graduation or grace period. It also does not take into account any loan fees.