The Low Down on Student Loans and Taxes

Student Loans Photo by Element5 Digital on Unsplash

Let’s now talk about Student Loans and Taxes.

In 2020, the National Center of Educational Statistics stated that over 19.7 million students were likely to attend the fall semester, either online or in person. On average, students who attend higher education courses cannot afford to pay for those courses without financial assistance. Most colleges and universities offer financial aid programs through grants and specialized loans, and payments for these are typically deferred until the student completes the program. Academic and financial advisors all agree that students should try to only take the minimal amount to cover their expenses, so they do not end up in more debt than necessary. 

Grants are available for many students who achieve great things academically and who have suffered financial hardships. There are a few options for grants, where students who are interested should apply online through the Financial Student Aid site. This site also allows students to view what educational specialized loans they qualify for if they aren’t eligible for a grant. Most grants are free money and do not need to be repaid. The educational loans do need to be paid back, and those loans will typically accrue interest, which can increase the amount substantially. 

As far as this goes for students and their taxes: students can deduct the interest they may have paid on these loans during that tax year.

The loan service the students used will send over a statement showing the interest paid. This form is the 1098-E. If you paid more than $600 in interest, then you should receive at least one of these forms from the loan service. If you had more than one type of financial loan, you may receive more 1098-E forms. If you paid less than $600, you may need to contact the borrower service for the exact amount for your taxes. As always, if you have any questions, please consult one of our financial experts.

Have any questions, give us a call here at Metro Tax & Financial Services.
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