How to Deduct Student Loan Interest on your Taxes (1098-E)

1098-E Tax Form

Student loans, interest payments, and taxes: three things that have scared many people for years now. Read on to learn how these things can benefit you.

If you made federal student loan payments in 2017, you may be eligible to deduct a portion of the interest paid on your 2017 federal tax return. This is known as a student loan interest deduction. Don’t miss out on this opportunity to make the money you’ve paid work for you! Below are some questions and answers to help you learn more about reporting student loan interest payments from IRS Form 1098-E on your 2017 taxes and potentially get this deduction.

What is IRS Form 1098-E?

IRS Form 1098-E is the Student Loan Interest Statement that your federal loan servicer will use to report student loan interest payments to both the Internal Revenue Service (IRS) and to you.

Will I receive a 1098-E?

If you paid $600 or more in interest to a federal loan servicer during the tax year, you will receive at least one 1098-E.

The IRS only requires federal loan servicers to report payments on IRS Form 1098-E if the interest received from the borrower in the tax year was $600 or more, although some federal loan servicers still send 1098-E’s to borrowers who paid less than that.

If you paid less than $600 in interest to a federal loan servicer during the tax year and do not receive a 1098-E, you may contact your servicer for the exact amount of interest you paid during the year so you can then report that amount on your taxes.

How many 2017 1098-E’s should I expect to receive?

That depends on how much you paid in interest, how many federal loan servicers you had, and some other factors. Read through the scenarios below to find where you fit and learn how many 2017 1098-E’s you should expect.

  1. Your current servicer was your only servicer in 2017: In this case, your current federal loan servicer will provide you with a copy of your 1098-E if you paid interest of $600 or more in 2017. Your servicer may send your 1098-E to you electronically or via U.S. mail.
  2. You had multiple servicers in 2017: In this case, each of your federal loan servicers will provide you with a copy of your 1098-E if you paid interest of $600 or more to that individual servicer in 2017. Your servicer may send your 1098-E to you electronically or via U.S. mail.

If you paid less than $600 in interest to any of your federal loan servicers, you can contact each servicer as necessary to find out the exact amount of interest you paid during the year.

How will reporting my student loan interest payments on my 2017 taxes benefit me?

Reporting the amount of student loan interest you paid in 2017 on your federal tax return may count as a deduction. A deduction reduces the amount of your income that is subject to tax, which may benefit you by reducing the amount of tax you may have to pay.

For more information about student loan interest deduction, visit the IRS’s Tax Benefits for Education: Information Center.

Now that you know student loans, interest rates, and taxes aren’t as scary as you may have originally thought, you are ready to report your student loan interest rates on your 2017 federal tax return!

What if I still need help or have more questions?

While we are not tax advisors and cannot advise you on your federal tax return questions, your federal loan servicer is available to assist you with any questions about your student loans, including questions about IRS Form 1098-E and reporting the student loan interest you’ve paid on your 2017 taxes. If you’re not sure who your loan servicer is, visit My Federal Student Aid to find contact information for the loan servicer or lender for your loans. To see a list of our federal loan servicers, go to the Loan Servicers page on StudentAid.gov.

 

National Financial Capability Challenge

Today is the first day of the 2011 National Financial Capability Challenge! Check out this video message from Secretary Duncan encouraging high school teachers to sign up their students to participate. See the press release. Read a blog post by a high school business teacher.

If we teach students about money while they’re young, they’ll be in better financial shape in the future. We’re hoping the Challenge will encourage state and local leaders to weave financial education into schools—starting even earlier than high school—so students are ready to make important financial decisions when they need to.

Phil Martin
Office of the Secretary


Click here for an accessible version of the video.

Empowering Youth, Meeting the Challenge

Cross-posted from the Treasury Notes Blog.

As an English teacher in an inner-city Los Angeles community for seven years, I have seen the importance of empowering young people with the skills they need to build a foundation for long-term financial security.

Knowledge is power.  And in the case of the National Financial Capability Challenge, knowledge about money is a powerful tool to help equip students to take control of their financial futures.

The Challenge, which is administered by the U.S. Department of the Treasury and U.S. Department of Education, includes a voluntary online exam with awards for top-scoring students. It is designed to help teach young Americans to make smart decisions about earning, spending, saving, borrowing, and other critical financial skills. To help prepare students for this exam, teachers will have access to a new “educator toolkit” – released today and available here – that includes a wealth of powerful lesson plans.

These lesson plans will help students build a variety of financial skills, such as:

  • Identifying positive and negative spending behaviors
  • Developing a personal budget, including a savings plan and a spending log
  • Opening, monitoring and balancing checking and savings accounts
  • Identifying the costs and benefits of purchasing insurance and investing in higher education
  • Weighing the advantages and disadvantages of using credit
  • Identifying the impact of interest rates and fees on the price of a credit card purchase
  • Identifying methods to minimize the risk of identity theft

Teachers can select lessons from a menu of options and adapt them to fit the unique needs and learning styles of their students, such as adding culturally relevant connections to lessons and creating class projects. Additionally, for the first time, this year’s toolkit will include interactive online lessons and Spanish-language materials.

Last year, more than 76,000 students participated in the National Financial Capability Challenge. And, hopefully, even more will take part this year. Teachers can go to http://www.challenge.treas.gov/ and join the Challenge this spring to help empower their students through financial awareness and education.

Linda Yaron is Teacher Ambassador Fellow at the U.S. Department of Education