The Student Loan Tax Break Information Loan Brokers Won’t Tell You

student loan

I think almost every week I hear someone who makes over $70k a year mention their wonderful student loan interest tax deduction. It’s time to take a few minutes to educate the masses about the student loan interest. Plain and simple, if you make a good wage you will not qualify for the student loan interest tax deduction.

Student loan brokers make a big deal about the wonderful tax benefits of student loans while leaving out the kicker that as soon as you start to make a good wage (which is the point of college, now isn’t it?) that you no longer qualify for the deduction. This is especially true if you live in an area that pays higher wages overall.

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6 Responses to The Student Loan Tax Break Information Loan Brokers Won’t Tell You

  1. Overeducated says:

    Wow! I must be way underpaid. I have two degrees and never made even half of $55,000 in a year. Granted, I have been self-employed for the past several years, but I don’t think I would be able to find a job that paid me that much. Even my income combined with my husband’s falls way below $55,000.

  2. Jason says:

    Interest is tax deductible on interest paid on both federal and private student loans so long as the borrower has an adjusted gross annual income of less than $65,000. If the borrower is married, then their combined adjusted gross annual income must be less than $130,000. Remind your tax consultant, finanical advisor and/or CPA of this fact. Most servicing companies will mail interest paid information automatically to you in February. If you never received yours, you can simply call your servicer to get that information.
    If you make more than $65K and or $130K jointly yearly, you don’t qualify but you make some good money. I am sure some of the people out there that get write offs will be more than happy to trade those writes offs for your income.

  3. Kim says:

    Actually, I worked for the Direct Loan program for two years (www.dl.ed.gov), and they automatically send all of their borrowers the tax form to deduct the interest on their loans at the end of the year. I hated working there due to the idiots that thought their failure to pay bills or understand basic finance (i.e. interest,) was someone else’s fault, but the program itself really runs well, is very fair to borrowers, and is easy to deal with. If you don’t have your student loan through them, try consolidating. I recommended them to a friend of mine, and it saved her a bundle!

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  5. Bd says:

    From the IRS:

    “The amount of your student loan interest deduction is phased out (gradually reduced) if your modified adjusted gross income (MAGI) is between $50,000 and $65,000 ($105,000 and $135,000 if you file a joint return). You cannot take a student loan interest deduction if your MAGI is $65,000 or more ($135,000 or more if you file a joint return).”

    http://www.irs.gov/publications/p970/ch04.html#d0e5127

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