Student loan payments restarting hasn’t been easy for many borrowers, but there’s one good thing that comes from making these monthly payments: a potential tax deduction.
Now that interest is again accruing on most student loans, borrowers can claim the student loan interest deduction on the interest paid when they file their annual taxes. The IRS allows borrowers to claim a deduction on interest up to $2,500. There’s no need to itemize this deduction since it is claimed as an adjustment to income.
To claim the deduction, student loan holders need to meet a few stipulations. Of course, they need to have paid interest on the loan in the year they are filing for. They also must not file as married filing separately; they must not be listed as a dependent on anyone else’s taxes and their modified adjusted gross income must be less than the set annual limit.
To save on your monthly student loan payment, refinancing can help you potentially score a lower interest rate. If you’re considering refinancing, make sure to compare student loan refinancing rates with the help of Credible before you apply, so you can make sure you find the best deal for you.
STUDENT LOAN BORROWERS STRUGGLE TO KEEP UP WITH MONTHLY PAYMENTS: STUDY
Student loan payments restart has gotten off to a rocky start
Although payments began again at the end of last year, not all borrowers have found the process easy. Borrowers are dealing with long wait times for customer service, delayed applications for new payment plans and incorrect billing statements, according to the Consumer Financial Protection Bureau (CFPB).
The CFPB’s report shows that the average customer service wait time was 73 minutes for the last few weeks of October. During the same period, over 450,000 income-driven repayment applications were pending for more than 30 days. As payments started up, many borrowers reported that they received inaccurate billing statements, loan disclosures and incorrect income-driven repayment payment amounts.
These issues paired with an inability to pay high-cost loans, have created a bad storm for lenders. About 60% of student loan borrowers struggled to even make payments when they were due in October 2023, according to a U.S. Department of Education survey.
If you’re struggling to afford your student loan payments, refinancing may help. If you can get lower interest payments on your loan, your payment will drop. An online tool like Credible can be handy for comparing student loan refinancing rates from multiple lenders without affecting your credit score.
NEW FAFSA REVEAL COMES WITH COMPLICATIONS, DELAYS
Forgiveness remains at a standstill
Student loan forgiveness had a rough battle this year, with the Supreme Court ruling against President Biden’s forgiveness plan that would have offered up to $20,000 in forgiveness for federal borrowers.
Looking into 2024, the fate of student loan forgiveness remains to be seen, leaving over $1.7 trillion in student debt. Although student loan forgiveness is stalled, there have been other federal efforts to curb the student loan crisis. The Biden-Harris administration has approved $132 billion in student loan forgiveness so far, according to recent data.
President Biden also released the Saving on a Valuable Education (SAVE) plan that aims to make payments more affordable for borrowers. The plan reduced minimum payments from 10% to 5% of the borrower’s discretionary income.
The SAVE plan also eliminates payments for borrowers who make about $15 an hour or less. And many borrowers don’t need to worry about building interest with the plan. The Department of Education is stopping monthly interest charges not covered by the payment under the SAVE plan.
Another way to save on your monthly payment is through refinancing and securing a lower rate. Credible can help you compare student loan refinancing rates from multiple lenders all in one place.
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