Data compiled by Student Loan Hero and YouGov finds major misconceptions surrounding student loan tax rules, deductions, and credits.
NEW YORK, March 22, 2016 – As Americans hurry to file their 2015 tax returns before the April 18 deadline, a new survey from Student Loan Hero finds most are unclear regarding the tax benefits and rules surrounding student loans. With 19% of American’s not knowing what student loan tax benefits they can claim*.
According to the survey, nearly half of Americans (48%) do not know the difference between a tax deduction and tax credit in general. Alarmingly, the data shows knowledge of tax rules as they pertain to student loans is far murkier.
“Student loan borrowers may be blindly leaving money on the table when it comes to their taxes,” said Andy Josuweit, CEO of Student Loan Hero. “Fortunately, borrowers still have time before taxes are due to learn their options and maximize the incentives available to them.”
Even so, those who receive a refund are putting those funds to good use. Student Loan Hero also polled survey participants to find out how they spent their tax refunds in 2015 versus how they plan to spend the money this year; the top responses included using the funds to pay off debt (44% vs. 39%, respectively), followed by spending it on something needed such as home repairs (26% vs. 23%), and putting the money in a non-retirement savings account (17% vs. 19%).
Additional Survey Highlights
General tax credits and deductions
- 17% of respondents incorrectly believed that tax credits and tax deductions are synonymous and affect taxes in the same way.
- 31% of respondents did not know if tax credits and tax deductions were the same thing and have the same impact on their taxes.
Claiming the student loan interest deduction
- Few respondents correctly answered “true” when asked in which situations a taxpayer can claim the student loan interest deduction: if they are not itemizing taxes (17%), if they don’t receive tax form 1098-E (11%), If someone else made payments on their behalf (15%).
- The majority of respondents were incorrect or uncertain regarding whether taxpayers can claim the student loan interest deduction for payments made on another’s behalf, with 16% responding “Yes, they can” and 56% responding “Don’t know.”
Tax return spending
- Debt repayment continues to be a top priority among taxpayers: 44% of respondents used their tax refunds to pay off debt in 2015, while 39% plan to do so in 2016.
- Only 5% of respondents in 2015 and 5% in 2016 put their refunds toward a retirement savings account.
In order to help student loan borrowers understand the potential tax benefits available to them, Student Loan Hero developed a free, easy-to-use Student Loan Interest Deduction Calculator and corresponding infographic.
Student Loan Hero commissioned YouGov PLC — a third party, professional research and consulting organization — to poll the views of a representative sample of 1,108 American adults. Fieldwork was undertaken between the 1st and 2nd of March 2016.
*We asked 4 questions about the tax related to student loan debt and 100% of Americans with student loan debt either answered a question incorrectly or stated that they did not know the answer.
About Student Loan Hero
Student Loan Hero combines easy-to-use tools with financial education to help the millions of Americans living with student loan debt manage and pay off their loans. Student Loan Hero has helped more than 60,000 borrowers manage and eliminate over $1 billion in student loan debt since 2012 and assists over one million people in becoming more financially healthy every year.
Student Loan Hero offers both current and former students free loan calculators, as well as unbiased, personalized advice and repayment plans through an easy-to-use online dashboard.
Founded in 2012 by CEO Andrew Josuweit, who himself had over $100,000 in student loans, Student Loan Hero operates on the belief that all loan help and recommendations should come with honesty and no hidden agenda.
Student Loan Hero has offices in New York, Austin and Portland. For more information, visit https://studentloanhero.com.
Megan Hartwick, Campaign Executive
Diffusion PR for Student Loan Hero