Paying interest on your private student loans throughout the year is no fun, but fortunately, when tax time comes, you may be able to benefit from all that interest paid with the student loan interest deduction.
An estimated 12 million people take advantage of this benefit, with annual deductions approaching $14 billion. This is especially important for those who have made payments on private student loans, which are not eligible for the same federal repayment relief options as federal student loans. However, interest paid on qualifying federal student loans may also qualify for the deduction.
Here’s what you need to know to find out if your private student loan interest is deductible and how to claim it.
What is the student loan interest deduction?
As a borrower with federal or private student loans, you can deduct the student loan interest (not principal) paid each year, up to a maximum of $2,500. This only applies when the loan is in your name or you are a co-signer. Your federal or private loan servicer will send you a 1098-E tax form after the end of each year to tell you how much interest you paid.
It only sends this form if you paid more than $600 in interest for the year. You can still claim the deduction if you paid less than this amount, but you will need to use your servicer or lender’s online portal to manually determine how much interest you paid.
The student loan interest deduction is an “above the line” deduction, meaning it comes Before you choose to benefit from the standard deduction or to detail your tax return. You can claim the interest deduction and also take the standard deduction – $16,100 per person in 2026!
All you have to do to claim the deduction is enter your loan interest paid on Schedule 1 of your Form 1040, the main page of your taxes. There are no additional tax forms to complete.
Who is eligible for the student loan interest deduction?
There are two main limitations on the interest deduction: income and tax filing status.
First, the IRS imposes income limits for deducting your student loan interest. These limits are based on your modified adjusted gross income (MAGI).
For tax year 2026, only borrowers whose MAGI is less than $85,000 for the year ($175,000 if married filing jointly) can take the student loan interest deduction. If your MAGI is between $85,000 and $100,000 ($175,000 and $205,000 if married, filing jointly), you are entitled to less than the maximum deduction of $2,500. Once your income exceeds these thresholds, you can no longer benefit from the deduction.
Modified adjusted gross income
It’s important to note that MAGI is not the same thing as adjusted gross income (AGI). To calculate your MAGI, start with your AGI but add some deductions. Notably :
- Half of any self-employment tax you paid
- Exclusion of income earned abroad
- Student loan interest
- Passive income losses
This makes it a little more difficult to qualify for the student loan interest deduction if you are self-employed or working overseas, because your MAGI may be a little higher than your AGI.
If you are self-employed, you pay self-employment tax of around 15% of your income. This covers the portion of Medicare and Social Security taxes that an employer would have covered if you had worked a W-2 job.
With half of this amount added to your calculation, your MAGI could be about 7.5% higher than your AGI and could exceed the limit for claiming the deduction.
You can counteract this as much as possible by contributing enough money to tax-deferred retirement plans through your company, such as a traditional 401(k) or SIMPLE IRA. Contributions to these accounts lower your MAGI each year and could bring it below the student loan interest deduction limit.
If you work overseas in a country that has a tax agreement with the United States and earn less than $132,900 ($265,800 if married filing jointly) for tax year 2026, you don’t need to worry about the interest deduction because you likely have little or no U.S. tax liability anyway.
Additionally, you can also benefit from extremely low federal student loan payments. Earning more than this amount means you likely won’t qualify for the student loan interest deduction.
Married Tax Filing Status
The second limitation is tax filing status when you’re married, especially if you also have federal loans. If you file your taxes jointly with your spouse, you are subject to the MAGI income limits. However, if you and your spouse report “married, filing separately” – which can occur when you exclude your spouse’s income and reduce IDR payments on your federal loans – you will not be able to claim the student loan interest deduction.
You’ll want to take this into account when calculating whether or not filing taxes separately is a net benefit to you. At the 22% tax bracket, assuming you paid at least $2,500 for the year in student loan interest, the interest deduction would reduce your tax bill by about $550. This means you need to save about $46 per month on your IDR payments by filing your taxes separately to make up for the lost deduction, otherwise it may not be worth it.
Everyone’s situation is different. If your situation is more nuanced, schedule a consultation with a Student Loan Planner® advisor to get expert help creating a plan to eliminate your loans.
Student loans and taxes are complex and impact each other in different ways. OUR team at Patrimoine SLP offers tax services to help you manage your unique tax situation, as well as profession-specific fiduciary financial planning services to support your broader goals.
