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How Student Loan Interest Deduction Works

You may be able to claim a tax deduction for your student loan interest

Did you make payments on a student or parent loan last year? Good news! You may be able to claim a tax deduction for the interest.

What is a student loan interest tax deduction?

A tax deduction is an expense that the IRS uses to reduce your taxable income. This, then, lowers the amount of taxes you are required to pay.

Under the Taxpayer Relief Act, student loan interest is considered a tax deduction in some cases. To qualify, you must meet income and other eligibility guidelines. And—because this deduction adjusts your actual income—if you qualify, you can claim it even if you do not itemize your deductions.
 

VSAC Student Loans That Qualify for a Tax Deduction

The following VSAC loans qualify for the Taxpayer Relief Act:

  • Federal Subsidized Stafford
  • VSAC Advantage
  • Federal Unsubsidized Stafford
  • VSAC EXTRA 
  • Clover
  • Green Mountain
  • VSAC EXTRA Law
  • Federal Consolidation
  • HEAL
  • VSAC EXTRA Medical
  • Federal Graduate PLUS
  • HEAL Consolidation
  • VSAC Law
  • Federal Parent PLUS
  • Paul Douglas Teacher Scholarship Loan
  • VSAC Medical
  • Federal SLS
  • VAST
 

If you have questions about non-VSAC education loans, please contact the organizations that service those loans.

 

How to Calculate Your Student Loan Interest Tax Deduction

Here’s how to calculate your student loan interest tax deduction:

  1. Get your 1098-E. If you paid $600 or more in interest on a qualified student or parent loan over the course of the year, your lender or servicer should send you an IRS Form 1098-E. They should also submit a copy of your 1098-E to the IRS. This form reports the amount of interest you paid to that lender or servicer for the year. For qualified VSAC loans, we will send your 1098-E by February 1 of the following year.

    Note: If you paid less than $600 in interest, you won’t receive a 1098-E form—but you may still qualify for a tax deduction. Please log into your MyVSAC account to view the amount of interest paid.
     
  2. Fill out your 1040 or 1040A. To determine your student loan interest tax deduction, use the information from your 1098-E and follow the directions within the IRS Form 1040 or 1040A instruction booklet.
  3. Ask for help. If you need help, talk to an accountant or tax professional, or visit the IRS website at irs.gov for copies of IRS Publication 970 (Tax Benefits for Higher Education) or other information. You can also call the IRS at 800-829-3676 for publications and forms, or 800-829-1040 for questions.