With federal student loan payments on pause, and debt forgiveness in the balance, here’s what borrowers need to know this tax season
Because the U.S. Department of Education has allowed most people with federal student loans to pause their monthly bills without interest accruing since March 2020, most borrowers haven't made a payment on their debt and don't qualify for the deduction as a result, said higher education expert Mark Kantrowitz.
"You can claim the student loan interest deduction based only on amounts actually paid," Kantrowitz said. Even if you've continued making payments during the pause, you likely still won't be able to claim the full deduction because your money has been going directly to your debt's principal. The break is only for payments to interest, Kantrowitz said, and interest has been suspended now for years.
The best way to determine if you have potential interest to claim is to contact your loan servicer, said Betsy Mayotte, president of The Institute of Student Loan Advisors. Mayotte said to keep in mind that there are income phaseouts for the break, and individuals who earned above $85,000 and couples who made more than $175,000 in 2022 are not eligible at all.on their student loans as a work benefit, Mayotte added.
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