The student loan interest deduction is a student loan tax benefit that can help offset the costs of borrowing and repaying this debt.
It also made it into the final version of the new GOP tax bill, even though there was talk of getting rid of it in earlier versions of the bill. Borrowers can deduct the interest they paid on student loans throughout the tax year, saving up to $625 on their taxes.
However, not everyone will get the full value of the student loan interest deduction. Find out how much lower your taxable income could be if you claim your student loan interest as a deduction.
Average student loan interest deduction worth $201
Like other tax deductions, the student loan interest deduction helps you by reducing how much of your income is taxed.
In this case, your taxable income is lowered by the amount of student loan interest you paid in 2017 — up to $2,500. It can lower your tax bill by as much as $625. And that could mean paying less in taxes or getting a bigger refund.
For student loan borrowers who count on their tax refund to make ends meet or get ahead on financial goals, it can be a huge help.
However, few tax filers get the maximum $625 value of the student loan interest deduction. Here are some stats on the student loan interest deduction, per 2017 Congressional tax estimates:
- 11.45 million Americans will be eligible to claim the student loan interest deduction on their return for the 2017 tax year.
- The average dollar value of the student loan interest deduction is $201.
Student loan interest deduction 2017: High-income filers benefit the most
Some filers get more than the average, however, as you can see in the table below:
|Income Class||Average Deduction Value|
|$10,000 to $20,000||$99.77|
|$20,000 to $30,000||$158.37|
|$30,000 to $40,000||$184.87|
|$40,000 to $50,000||$165.27|
|$50,000 to $75,000||$216.89|
|$75,000 to $100,000||$173.96|
|$100,000 to $200,000||$244.10|
|$200,000 and over||$66.67|
Filers who earn above $50,000 benefit the most from claiming the student loan interest deduction. And the highest average student loan interest deduction ($244) is claimed by those earning more than $100,000.
The fact that higher earners benefit the most from the student loan interest deduction is likely the result of a couple of factors. First, those who pay student loan interest and qualify for this student loan interest deduction are more likely to have a college degree and earn a higher income.
Additionally, low-income borrowers might pay less interest if they’re taking advantage of repayment options such as deferment, forbearance, or income-driven repayment plans. These repayment plans lower the payments borrowers make, sometimes to $0. If those borrowers pay little on student loans, they won’t have much student loan interest to claim.
Whatever your income level, if you paid student loan interest last year, you should look into claiming a student loan interest deduction for 2017. If not, you could lose out on getting some of that money back.
What is your student loan interest deduction worth?
As you work to prepare your taxes, you might want to better understand the value of your student loan interest deduction for 2017.
The average value of this tax benefit is $201. But the value of your student loan interest deduction will depend on the specifics of your situation. From how much interest you paid in the past year to the rate at which your income is taxed, your own student loan and tax details are key.
Fortunately, our student loan interest deduction calculator can quickly and easily estimate your personal savings if you claim this tax benefit. Using this tool can give you a more accurate idea of what kind of tax refund you can expect to get back.
Interest Deduction Calculator
Do you qualify for the student loan interest deduction?
The IRS makes it clear who can and can’t claim the student loan interest deduction. Here are some factors that affect whether you’re eligible to claim the student loan interest deduction for the 2017 tax year:
- Your income: This tax deduction is phased out at $80,000 modified adjusted gross income (MAGI) for single filers and $160,000 MAGI for filers who are married and filing jointly.
- Filing status: You can’t claim the student loan interest deduction if you’re claimed as a dependent on someone else’s return or if you’re married but filing separately. What won’t matter is whether you’re taking a standard deduction or itemizing. The student loan interest deduction is an “adjustment to income,” according to the IRS, and can be claimed either way.
- Qualified student loan: You must’ve paid interest on a student loan that was initially borrowed to fund qualifying educational expenses. Both federal and private student loans can qualify but not student loans from a family member.
- Student loan interest paid: You must’ve paid the interest on the qualified student loan during 2017, and it must’ve been on student loans you’re legally obligated to pay. Both prepaid student loan interest and loan origination fees can be claimed and deducted as interest paid.
The last point might be the trickiest since he person repaying a student loan isn’t always the person who owns it. Here’s when filers can and can’t claim the student loan interest tax deduction:
- Can’t claim: If a student loan is in your name but your parents are making the payments, your parents can’t claim the interest they paid since they’re not the legal owners of the loan.
- Can’t claim: You can’t claim the student loan interest tax deduction if someone else, such as a parent, is making payments, even if your name is on the loan.
- Can claim: Your parents can deduct interest they paid on student loans they cosigned with you since their names are on those loans.
- Can claim: You can claim interest you paid on student loans that are in your name, whether they were taken out to pay for your education or someone else’s.
If you paid more than $600 in interest charges on your student debt in 2017, you’ll get a 1098-E outlining the student loan interest you paid. Using the info from your 1098-E, you can claim your student loan interest deduction for 2017 and get the full benefit you’re entitled to.
If you didn’t receive a 1098-E from your lender, don’t worry. You can still claim your interest, but you might have to do some extra legwork to determine how much student loan interest you paid:
- Take a look at your account summary or payment statements for each student loan servicer you’re paying back to find out how much interest you paid in 2017.
- If that information isn’t readily available, contact each student loan servicer and ask for this figure.
With this information in hand, you can claim your student loan interest deduction when filing your 2017 tax return. Then comes the fun part: deciding on the smartest way to spend your 2017 tax refund.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|