How to Claim Student Loan Tax Credits and Deductions

student loan tax credits

Want to get rewarded for paying back your student loans? Make sure you claim your student loan interest payment deductions on your tax return. Tax time is the one time of year when you could actually see a significant amount of money deducted from taxes owed by repaying your student loans.

If you’re a single filer or you’re paying back student loans on behalf of a dependent, you could see a nice tax refund (up to $2,500) come your way if you paid for education related expenses in the last year or you made student loan interest payments – all thanks to a handful of helpful IRS education credits and student loan interest deductions.

So, who qualifies for these student loan tax credits and deductions?

Get our tax credit and deduction cheatsheet to go. Yours to keep

Case 1: You’ve paid interest on your student loans

It’s no fun putting some of your hard-earned money toward paying off interest that’s accrued on your debt, but the good news is you could get a student loan tax deduction for doing so.

The more student debt you owe, the more interest you’re likely paying every time you make a payment – and that means the more you can deduct from your taxes.

If you’re digging through the tax forms you got in the mail this year, keep an eye out for the Form 1098-E. This form from your student loan lender will let you know how much interest you’ve paid; you’ll use this to determine how much you can deduct when you file your taxes (up to $2,500 for single filers).

If you didn’t get a Form 1098-E from your lender, it might mean you paid $600 or less in interest in the past year – but you can still take this deduction, even without the form.

Did you pay down interest that accrued on your student loans, while on an Income Based Repayment or Income Contingent Repayment plan?

Here’s some extra good news for those who have signed up for an Income-Based Repayment or Income-Contingent Repayment plan: not only is your monthly student loan repayment lower, you can still take the interest deduction mentioned above, too.

According to the IRS, you’re allowed to deduct interest that you paid on qualified student loans regardless of your repayment plan. That’s a win-win in the short term.

Just remember: if the federal government ends up forgiving some of your student loan debt due to federal student loan forgiveness programs in the future, you’ll have to pay taxes on any amount that is forgiven.

Do you make less than $80,000 as a single filer ($160,000 for joint filers)?
To be eligible to deduct all or some of your student loan interest during tax time, you’ll need to have a modified adjusted gross income of less than $80,000, or $160,000 if married filing jointly.

With the average post-college salary hovering around $45,000 annually, many recent college graduates will qualify.

Wondering how much you can save with the student loan interest deduction? Find out with our deduction eligibility quiz!

Case 2: You paid for tuition, fees and other education expenses for an undergraduate degree or continuing education

Are you still in school or did you just graduate with a four-year degree this past year? Thanks to the American Opportunity credit, you could qualify for a nice refund.

If you paid for tuition, fees, books or other qualified education expenses and you attended school for at least half time for the tax year that you’re filing for, you could be able to take advantage of this credit for the first four years you attend school.

The American Opportunity Tax Credit will cover 100 percent of the first $2,000 in qualified expenses and then 25 percent of expenses after that up to $2,500. If you’re not pursuing a degree but you spent money on job training or other qualified education, you’re still in luck: you may be able to apply for the Lifetime Learning credit.

This is meant for folks that are continuing their education but not necessarily pursuing a degree. You can claim up to $2,000 per tax return with this credit. Keep in mind you can only claim one of the two credits listed above, not both.

Where and how can you claim these student loan tax credits and deductions?

Phew – that’s a lot of tax breaks to keep in mind! So just how do you file your taxes to take advantage of all that? IRS Form 8863 and Form 1040 for tax break and student loan interest deductions are going to be the two areas to pay attention to when you file your taxes.

Of course, if you have a relatively straight-forward tax situation, you should be able to file your taxes through online software, like TurboTax, and receive the appropriate prompts to claim your deductions and your credits. You may even be able to file your taxes for free.

Need to file your taxes?

Here are the top tax software options for 2017!
ProviderOptions 
Free version available. Starting at $34.95 for "Deluxe"Learn More
Free version available. Starting at $34.95 for "Deluxe"Learn More
Free version available. Starting at $15 for "Plus"Learn More
Starting at $10.47 for "EZ"Learn More
Starting at $39.95 for State + Federal returnLearn More
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Published in Direct Loan Consolidation, Federal Student Loan Repayment, Federal Student Loans, Private Student Loans, Public Service Loan Forgiveness, Student Loan Taxes, Taxes

  • Bre Ferguson

    My monthly payment is set to zero based on my income, but great lakes keeps telling me I still should claim the money that has been paid on my interest for me. Is this true? It seems like they’re way off, but I’ve even called and they told me twice now.

    • Hi Bre,

      I can’t say for sure on the question.

      However, I do know that the IRS generally states that “If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest.” from here: https://www.irs.gov/publications/p970/ch04.html#en_US_2014_publink1000178272

      That said, I would suspect what Great Lakes is telling you is correct. However, to be sure you’d likely need to check with a tax professional and/or the IRS directly.

      I hope this helps. Let us know if there’s anything else we can do.

      Best,

      Jeffrey
      Student Loan Hero

  • Leonis

    @jeffrey_trull:disqus I consolidated my student loans from Navient to Great Lakes this January. Great Lakes paid Navient my loan in full, and Navient sent me a 1098, does that still count as receiving the deduction for my taxes or no since another institution paid my loan in full.

    • Hi Leonis,

      First off, just to clarify: the Student Loan Interest Deduction only applies to interest paid, not principal. Consolidating your loans like this typically only relates to principal, so it likely wouldn’t impact the amount of interest paid.

      In terms of the 1098 form you received, typically the amount in Box 1 is what you can deduct. Does the amount there seem consistent with the interest you paid?

      Hope this helps. Let me know if you have other questions.

      Best,

      Jeffrey
      Student Loan Hero

      • Leonis

        Thank you for you reply. In box 1, i see an amount received by lender. I owed 24K in student loans to Navient which Great lakes paid in full. I am assuming that since great lakes paid in full, Navient took the interest from that amount and entered it in Box 1. My question is, even if Great Lakes was the one that paid Navient, not me, can i deduct it from my tax?

        • Hi Leonis,

          If we’re talking about the same form here, Box 1 should be “Student loan interest received by lender.” Is that what your form says?

          You can see this here: https://www.mygreatlakes.org/educate/knowledge-center/1098E-tax-statements.html

          If the amount in that box is the same as your student loan balance, it sounds like there may be a problem with your form. I would ask Great Lakes to check on this.

          Again, I still don’t see how Great Lakes paying Navient would impact interest, so I’m sorry, but I don’t have an answer to this question. I’d recommend you contact Great Lakes, the IRS, and/or a tax professional.

          I hope this helps.

          Best,

          Jeffrey
          Student Loan Hero

  • Michelle

    When filing taxes with my husband we had a total of over 2,800 paid in interest from our student loans yet when doing our taxes through Turbo Tax we only got back about 450 of that. Why didn’t we get more back on our tax return? I thought we were supposed to get most if not all of it back.

    • Hi Michelle,

      Thanks for your question. What you’re describing seems to be the discrepancy between a tax deduction and a tax credit.

      For student loan interest paid, it’s a tax deduction. This means your table income is lowered. In your case, if you paid $2,800 in student loan interest, it would lower your tax liability by up to $2,500 (depending on your income). The reason for the $2,500 is this is the cap according to tax code.

      The maximum refund amount that the student loan interest deduction is worth is $625.

      This is different than a tax credit, which basically gives you the exact amount deduction in your tax liability. So if you receive a $1,000 tax credit, you could get a tax refund of $1,000 from this.

      Typically a tax credit is more valuable than a tax deduction.

      Does this make sense? You can read more about this here: http://blog.turbotax.intuit.com/tax-deductions-and-credits-2/tax-deduction-vs-tax-credit-529/

      I hope this helps. Let me know if you have other questions.

      Best,

      Jeffrey
      Student Loan Hero

  • marie

    I did not receive 1098-E forms for two of my loans, however, I can see how much interest was paid for 2015 and they give me my lender’s federal ID Number. Does that information suffice when filing my taxes or do I need a 1098-E form? Thank you.

    • Hi Marie,

      That’s probably okay, but I really can’t be certain. Of course if it has the same information that the 1098-E form has, then the outcome for your taxes would likely be the same.

      To be safe you could simply request this form from your servicer or see if it’s available online.

      I hope this helps. Let us know if you have other questions.

      Best,

      Jeffrey
      Student Loan Hero

      • Hi Marie,

        I also forgot to mention that you will only receive a 1098-E form if you paid $600 or more of interest in 2016. So if you didn’t pay this much, you’ll likely need to use whatever tools are available from your servicer to find this amount.

        Best,

        Jeffrey

  • Hi Christie,

    Great question. The amount you get back depends on your income. The maximum you can possibly receive is $625. That’s if you paid $2,500+ in student loan interest and your tax rate is 25%.

    One way you could estimate is to take the student loan interest you paid in dollars and multiply by your tax rate (found here: http://taxfoundation.org/article/2014-tax-brackets)

    So for example, if you paid $1,000 in interest and your tax rate is 20%, the value of your deduction should be around $200.

    There are other factors to consider, so this would just be an estimate. I’m not sure about what it takes to refile, so it’s best to get in touch with a tax professional if you decide to move forward.

    I hope this helps. Let me know if you have more questions.

    Best,

    Jeffrey
    Student Loan Hero

  • Chaneel Allen

    Hi, I worked and studied in the US but live overseas. I pay my student loans and have received my 1098-E i’ve paid more than $10,000 in interest. Can I file for any returns?

    • Hi Chaneel,

      I’m not certain but I’m guessing that if you’re filing a U.S. tax return you probably can claim this deduction. However, I’d check with a tax professional or other source.

      Hope this help. Let me know if you have other questions.

      Best,

      Jeffrey
      Student Loan Hero

  • franksspam

    My student loans are showing accrued interest but I am not in repayment status yet because I’m still in school. Do I have to wait until I start repaying on the loans to claim the interest that is accruing? Do I only get credit for the interest that I actually paid during the year?

    • Hi,

      Yes, typically you can only deduct interest that you’ve already paid and not interest that’s accrued but is unpaid.

      Hope this helps. Let me know if you have other questions.

      Best,

      Jeffrey
      Student Loan Hero

  • Brian Slider Azzoto

    Hello, I need some advise. I have been paying on a loan since 2007 through Navient. I thought that my loans were eligible for PSLF as I know that my employer falls under the requirements. I was told when my loans were with Sallie Mae and when they were taken over by Navient that because my loans were consolidated that I qualified. Well I applied for the PSLF and I was rejected stating my loans did not qualify. I called Federal Student Aid and they said my loans weren’t Direct Loans. If I would have known that in the beginning I would have changed them to Direct Loans. Why would Sallie Mae and Navient tell me that because my loans were consolidated that I would qualify for PSLF? But anyways is it still worth consolidating my loans to Direct Loans and doing REPAYE? If I stay with Navient I would have to pay til 2032. I guess I do not know what the best move I should make be. I feel lied to!! I thought I saw the light at the end of the tunnel. Any advise would be great.

    Thank you

    Brian

    • Hey Brian,

      Sorry to hear about that. That sounds like a pretty terrible situation. Unfortunately, we’ve heard of servicers providing incorrect information before.

      I guess I’m curious: under what program are your loans consolidated if they aren’t under the Direct Loan program? Are they actually consolidated? Or do you just pay them as a group with Navient?

      In any case, it’s hard for me to say what you should do here as it really comes down to numbers. I’d suggest running some calculations to see what you’d end up paying and what would be forgiven with each option. This tool is likely the most helpful: https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

      I hope this helps. Let me know if you have other questions. Best of luck!

      Cheers,

      Jeffrey
      Student Loan Hero

  • Hi Nik,

    While I’m not familiar with state laws related to this, it should be. The 1098-E just tells you how much interest you paid. It does not necessarily mean that you’re able to deduct all or any of the interest listed on the form from your taxes.

    Hope this helps. Let me know if there’s anything else I can do.

    Best,

    Jeffrey
    Student Loan Hero

  • Hi Shaunak,

    I’m sorry, but I’m really not sure on that. That would be a question that you’d need to ask the IRS and/or a tax professional.

    Best,

    Jeffrey

  • Erwin Lius

    Hi there,

    I’ve been paying my wife’s student loan for the past 2 years : 2014 and 2015 but i completely forgot that we can claim the interest that we pay to the loan company. since i already filed my tax income for 2014 and 2015, can i still claim these 2 interest now? or next year income tax season?

    Please help give me some input / suggestion.

    Thanks.

    • Hi Erwin,

      I’m guessing if you wanted to claim the interest, you’d need to file an amended tax return for 2014. I don’t think you’d actually just be able to add it to the interest to future years’ returns. Speaking with an accountant or tax professional would likely provide a better answer to this.

      The tax return due in 2016 is for 2015, so you can claim any eligible interest paid in 2015 on this year’s return.

      Hope this helps. Let us know if you have other questions.

      Best,

      Jeffrey

  • Hi Trang,

    Sorry, but you need to have made the interest payments in the tax year for which you’re filing. So any payments you make now will only apply to when you file your 2016 taxes a year from now.

    In addition, you likely can’t claim this deduction whenever your parents are claiming you as a dependent.

    Best,

    Jeffrey

  • Conservative Youth

    Maybe you can help. I’m waiting for a call back from turbo tax, and if I get an answer from them first, I will post what they tell me as a reply to this. I got a 1098 e this year after filing our taxes. (Didn’t know I would be getting one). The reason I got the form was because they didn’t process the injured spouse form on our taxes last year, so the DOE garnished it from the refund last year. Well, I obviously refiled with the injured spouse form last year but they didn’t process it and get us the money back from the DOE until after we filed this year. This means that now there is no payment made to the DOE or more accurately I guess the form was from American Student Assistance. Should I file an amendment with the 1098 e on it? We already have to file an amendment due to another unexpected form that we received after filing. If I were to claim the 1098 e, would that screw things up for next year’s filing, as in would we pay back any extra refund received from filing it? I’m guessing I shouldn’t file it, since that money was returned to me. Or will they send a tax form next year saying that it was returned and that I will owe something because of it? I don’t see why they would if I don’t file it as part of my taxes this year. I am so confused!!!! Please help if you can!

    • Hi,

      Thanks for your question. To be honest, that seems like a pretty complicated situation. I’m not a tax expert, so you’re likely much better off asking Turbo Tax or another tax professional regarding this question. You could try checking with the IRS too.

      However, I will say that I don’t believe there’s any requirement to claim a tax deduction from a 1098-E. If you claim it, you obviously get the benefits of the deduction. If you don’t, you simply get nothing. That’s my understanding.

      In case you’re curious, here’s a calculator we have to estimate how much this deduction is worth: https://studentloanhero.com/calculators/student-loan-interest-deduction-calculator/

      Hope this helps. Best of luck!

      Cheers,

      Jeffrey

      • Conservative Youth

        Thank you. Turbotax should be calling me back any minute now. The automated system said wait time was about 50 minutes and it’s almost been that long since I called. I will post a summary of what they tell me.

      • Conservative Youth

        TurboTax said don’t file it since it is basically not a payment anymore. I kind of figured that this was the case, but wanted to verify. Thanks again for your help!! Have a good one!!!

  • Hi Andi,

    Sorry to hear about this. Unfortunately, it is limited to $2,500. To be honest, we really hope that the government raises this limit.

    I’m not sure if these are your student loans or your children’s, but to my knowledge, you cannot claim payments made on behalf of someone else. On the person who is legally liable to pay the loan (as in, name is on the loan) can claim this.

    That said, I’m not sure how this would work out filing jointly vs. separately. You may wish to have an accountant check both scenarios. Keep in mind the maximum value the deduction is worth is $625 per filer, so it might not be worth it.

    I hope this helps. Best of luck!

    Jeffrey

  • Mahiyar Osaanlu

    Hi , I Consolidated My Fed. Student loans From Navient to Nelnet this past May , While I was with Navient, I did not pay any interest during 2016 year since I had a 0 dollar payment schedule through my repayment plan. Now my question is Since Nelnet paid off all my balance including the interest accrued on the loans during the months that I had 0 dollar payment schedule in 2016 , then since both Principal & interest are fully paid by Nelnet to Navient, then will Navinet issue a 1098-T to me although it was not me who paid any interest. In other words basically the new servicer just paid off the whole balance ( Interest + principal ) , but I paid no interest myself … so will I receive the 1098-T becasue the other servicer paid off everything including the interest ? Thanks

  • Sarah Hansen

    I paid 7800 in student loan interest this year. Can I write off what I paid over the $2500 deductions?

  • Irinka

    a couple of questions?

    what do you put as interest paid, the amount that it states on the 1098-e form or the amount you paid toward loans? ? ( I paid one amount and the form that came in the mail had a diff amount)

    So I am on income based, Married, (planning to file separately to reduce payment amount)….what is the best plan of action to repay the multiple loans?

    since school been on deferments and income based how has my loan grown and why?

    can provide more info, just feel like im putting money in a hole and i still want to go back to school…

  • Robert Maynard

    Hi, I went into repayment from in-school deferment this year and consolidated all my loans during the grace period. I received a short forbearance, then re-enrolled and went back into in-school deferment. I received a 1098-E from one of the original lenders with the interest amount paid to them by the lender who consolidated everything. I read the provision that “interest paid by someone else” is deductible, but since no actual loan payments were made–simply shifting the debts from one lender to another–is that interest deductible?

  • Dawn Garrett

    I havent had to start paying on my loans yet so my interest is 0 do i still have to put it on my taxes?

    • Hi Dawn,

      If you haven’t made any payments towards your student loans, you probably have not paid any interest (like you said). For borrowers who haven’t paid any student loan interest, there’s nothing to claim on taxes.

      Hope this clears things up!

      Best,

      Jeffrey

  • chanell

    I made 8,000 last year and received a 1098-E I paid 814. in interest. How come I didn’t get any credit for my student loan?

    • Hi Chanell,

      I’m a little confused by what you mean. What do you mean that you “didn’t get any credit” for your student loans? It sounds to me like this has been indicated on your 1098-E form.

      Let me know how I can help!

      Best,

      Jeffrey