Student Loan Interest Deduction: Who Qualifies and How To Claim It
Written by
Rudri Bhatt Patel, CFHC™
Edited by
Nupur Gambhir, CFHC™
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The student loan interest deduction allows eligible borrowers to deduct up to $2,500 in interest paid on qualified federal or private student loans, even if they take the standard deduction. Eligibility depends on factors like your filing status, modified adjusted gross income (MAGI), and whether the loan and expenses meet IRS requirements.
While income limits can reduce or eliminate the deduction for higher earners, many borrowers can still benefit, especially since only the interest portion of payments counts. Claiming the deduction is straightforward with Form 1098-E and IRS Form 1040, and for those who qualify, it can meaningfully reduce taxable income and increase a tax refund.
What Is the Student Loan Interest Deduction?
The student loan interest deduction is a federal tax break that allows eligible borrowers to deduct up to $2,500 in interest paid on qualified student loans from their adjusted gross income (AGI). This deduction is considered above-the-line, meaning you can claim it even if you take the standard deduction.
According to the IRS, more than 13 million taxpayers claimed this deduction recently. Depending on your income and tax bracket, this could save you between $200 and $550 on your taxes.
Are Student Loans Tax-Deductible in 2026?
If you meet the IRS eligibility criteria, student loans are tax-deductible.
Here’s what you need to qualify:
You must
- Have paid interest on a qualified student loan in 2025
- Be legally obligated to repay the loan
- Not be claimed as a dependent on someone else’s tax return
- File as single, head of household or married filing jointly
- Have a modified adjusted gross income (MAGI) within the IRS limits
You won’t qualify if
- You file as married filing separately
- Your income is above the phaseout limits (see next section)
- You’re repaying someone else’s loan that’s not in your name
What Are the Student Income Limits for 2026?
Your MAGI and filing status determine how much — if any — of the deduction you can claim.
| Filing Status | Full Deduction | Partial Deduction Range | No Deduction Over |
|---|---|---|---|
| Single | Up to $2,500 | $85,000 to $100,000 | $100,000 |
| Married Filing Jointly | Up to $2,500 | $175,000 to $205,000 | $205,000 |
According to the Tax Foundation, nearly 20% of borrowers are phased out of the deduction due to high income levels.
What Types of Student Loans Are Eligible?
Not every loan qualifies for the deduction. The IRS has strict rules about the source of the loan and how the funds were used.
Loans that qualify
- Federal Direct Loans (subsidized and unsubsidized)
- Federal PLUS Loans (including Parent PLUS)
- Federal Perkins Loans
- Private student loans from banks, credit unions or other qualified lenders
- Consolidated or refinanced loans (as long as the original loan was qualified)
Loans that don’t qualify
- Loans from family or friends
- Employer-based repayment assistance (if not reported as income)
- Loans used for non-degree programs or unqualified education expenses
Qualified education expenses include
- Tuition and fees
- Room and board
- Books and supplies
- Transportation and equipment required for coursework
Over 43.2 million Americans hold federal student loan debt, according to the U.S. Department of Education.
How Much Student Loan Interest Can You Deduct?
You can deduct up to $2,500 in student loan interest each year, but only the interest portion of your payments qualifies. Payments toward the loan principal — as well as late fees or penalties — aren’t deductible.
See How Much Student Loan Interest You Can Deduct
If you paid $3,000 toward your student loans in 2025 and $1,800 of that amount was interest, your deduction would be limited to $1,800, not the full $3,000.
For context, data from the Education Data Initiative shows that the average student loan borrower pays between $1,200 and $2,000 in interest per year, which means many borrowers can deduct most — or all — of the interest they pay if they qualify.
How To Claim the Student Loan Interest Deduction in 2026
Claiming this deduction is straightforward — but missing a step could cost you.
What You Need and Where to Claim It
Before you file
- If you paid at least $600 in student loan interest (not total loan payments or principal) during 2025, your loan servicer should send you Form 1098-E
What you need
- Form 1098-E from your loan servicer showing the total student loan interest you paid
Where to report it
- Enter the interest amount on Schedule 1, Line 21 of IRS Form 1040
Final checks
- Confirm your modified adjusted gross income (MAGI) is within the IRS income limits
- File your return — you don’t need to itemize to claim this deduction
Tip
If you had multiple loans with different servicers, combine the interest reported on all 1098-E forms to calculate your total.
Why You Might Not Qualify for the Student Loan Interest Deduction
Even if you paid interest, you could still be disqualified if:
- You’re still in school and not required to make payments (unpaid interest doesn’t count)
- You paid less than $600 and didn’t receive Form 1098-E — though you can still deduct if you have documentation
- You’re a dependent on someone else’s tax return
- The loan wasn’t in your name, or you’re not legally obligated to repay it
- The loan came from an unqualified source, like a relative
Bottom Line: How to Claim the Student Loan Interest Deduction
The student loan interest deduction is one of the easiest tax breaks to claim because it doesn’t require itemizing — and it can still make a meaningful difference if you’re paying off student debt in 2026.
Here’s what to remember:
- You can deduct up to $2,500 in student loan interest, even if you take the standard deduction.
- The deduction applies to both federal and private student loans, as long as they qualify.
- You’ll need Form 1098-E from your loan servicer and a MAGI within IRS limits to claim it.
- The deduction lowers your taxable income, which can reduce what you owe or increase your refund.
Don’t leave this money on the table. If you made student loan payments last year, double-check your eligibility before filing your taxes.
FAQs About the Student Loan Interest Deduction
Here are the answers to some of the most frequently asked questions about student loan interest deduction and how it works:- Can I deduct interest on private student loans?
- Yes -- as long as they were used for qualified education expenses and came from an eligible lender.
- What if I didn’t get a Form 1098-E?
- If you paid less than $600 in interest, your servicer isn’t required to send it -- but you can still deduct the amount. Check your payment records.
- Can I claim the deduction if I’m in deferment or forbearance?
- No. You must have actually paid interest during the tax year to qualify.
- Is this deduction available for graduate student loans?
- Yes, as long as the loans meet all other IRS qualifications.
- Can I claim this if my employer helped repay my student loans?
- Maybe. If the repayment is counted as taxable income, the interest portion may be deductible. If it’s tax-free assistance (like under the CARES Act), you can’t double dip.
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