Understanding Student Loan Interest Tax Deductions

When filing federal taxes, taxpayers who paid interest during the year on qualified student loans may be able to deduct up to $2,500 of that interest from their taxable income, subject to income limits and eligibility rules set by the Internal Revenue Service (IRS).¹

The student loan interest deduction is a federal tax provision that allows eligible taxpayers to reduce their taxable income by the amount of interest they paid on qualified student loans during the tax year, up to a maximum of $2,500 in 2025.² It is claimed as an adjustment to income, meaning you do not need to itemize deductions.

How the Deduction Works

To qualify:¹

• The loan must be used solely for qualified higher education expenses (e.g., tuition, fees, books, supplies);
• Interest must have been paid in the tax year for which you're filing;
• The loan was taken out for yourself, your spouse, or a person who was your dependent when you took out the loan; and,
• It was for education provided during an academic period for an eligible student.

You can claim the deduction for qualifying loans if all of the following apply:¹

• You are legally obligated to pay the loan's interest.
• You are not claimed as a dependent on another taxpayer's return.
• Your filing status isn't "Married Filing Separately;" and
• Your MAGI is less than a specified amount which is set annually

The amount you can deduct is subject to modified adjusted gross income (MAGI) thresholds. For tax year 2025, the deduction begins to phase out for:²

• Single and head of household filers with MAGI over $85,000 but less than $100,000.
• Married filing jointly with MAGI over $170,000. If MAGI exceeds the upper limits (e.g., $100,000 for singles and $200,000 for joint filers), eligibility may be reduced or eliminated.

Filing and Claiming the Deduction

The deduction is claimed on Form 1040 – Schedule 1 as an adjustment to income. Because it reduces your taxable income directly, you can claim it even if you take the standard deduction.¹ Keep your Form 1098-E from lenders reporting interest paid, as it supports the deduction when preparing your return.

Frequently Asked Questions

Q: Can interest on private loans be deducted?

Yes, interest on private loans used for qualified higher education expenses may qualify, provided the interest meets IRS rules and is reported appropriately.²

Q: What is the maximum amount I can deduct?

The maximum deductible amount of student loan interest is $2,500 for tax year 2025, subject to income limits.¹

Q: Does the deduction apply to loans taken out by someone else?

Generally, the deduction applies if you are legally obligated to repay the loan and meet eligibility criteria. Loans taken out by others typically do not qualify unless you are jointly responsible.²

Interested in learning more about how to pay for college? Explore financial aid options at AIU.