Living as a student can be quite tough. Due to the high tuition rates, fees, and other living expenses, a lot of students quite often find themselves struggling to cope financially. It is due to this reason that the concept of financial aid programs such as; student loans, scholarships, etc., was born. However, even though student loans have proven effective in aiding unprivileged students financially, it has – more often than not – proved damning, as it tends to leave students in a great deal of debt. Let us discuss, What form is student loan interest reported on?
Student loan interest is reported on Form 1098-E of the IRS. On this form, any student loan interest paid is reported to both the payer and the IRS. Federal loan servicers are demanded to report on interest payments that exceed $600 by the IRS. Read on for more details.
Student Loan Interest Reports
The Internal Revenue Service (IRS), demanded that federal student loan servicers report the payment of student loan interest by January 31st, 2022. Federal student loan handlers were required to report any and every payment of student loan interests that exceeded $600. All payments exceeding $600 were required to be reported to the IRS and the payer/ loan borrower on IRS form 1098-E. For any student loan interest payments below the $600 mark, the payer can find a report on the website of the servicer he or she paid through. Also, if needed, the payer may request an IRS 1098-E form.
Claiming Student Loan Interest on Taxes
With all the hassle involved in paying back student loans, worse still is the fact that while borrowers may delay in payments, interest on these loans continues to stack up, building up right from graduation, consequently surmounting to an even larger amount of debt, making it increasingly harder for borrowers to pay back.
Nevertheless, the fact that the interest it gathers is deductible is a huge relief to borrowers. Student loan borrowers may claim interest paid on their student loans for the last five (5) years. Only the borrower of the loan, however, may claim this interest. That is the person in whose name the loan was collected. No one else may claim this interest on your behalf, not even if it was paid for by someone else.
However, not all student loans have deductible interests. Here is a list of loans that you cannot claim interest on
- You can’t claim interests on business loans, not even if it was used to pay for schooling
- Loans from private institutions or lenders
- A line of credit
- Loans from financial institutions
An important takeaway here is that you cannot claim interests on private given student loans.
Do I have to include student loan interest on my taxes?
The answer is no. While you may feel obligated to include your student loan interest report in your taxes, there is no requirement for this.
Why did I receive two 1098-Es?
An IRS 1098-E form is sent to you reporting your student loan interest payment. Since this report form is sent to you by your federal student loan handler, if you make multiple student loan interest payments in a year using different handlers, you will eventually get an IRS 1098-E form from each one of these handlers (assuming the payments through each handler matches or exceeds $600), resulting in you receiving multiple 1098-Es.
How Do I Get My 1098?
As stated earlier, the 1098-E is the form on which your student loan interest payments are reported, to both you and the IRS. You will be sent your 1098-E form by the federal student loan servicer you paid through, either through email or postal mail. If your student loan interest payments for the last year are below $600 you may not be sent a report. However, if that is the case, you may proceed to your federal student loan servicer’s webpage and download a copy of your 1098-E for yourself.
What is the Student Loan Interest Rate?
Currently, the student loan interest rate for undergraduates is 3.73%. For graduate student loans, the federal interest rate is 5.28%.
Note: The interest rate of student loans for private students may be a bit lower than that of federal students.
Here is a breakdown of the student loan interest rates
- For refinance student loans
2.59% to 9.15% (fixed), 1.88% to 8.9% (variable)
- For private student loans
3.34% to 14.99% (fixed), 1.04% to 11.99% (variable)
- For federal student loans
Undergraduate: 3.73%, Graduate: 5.28%, Parent student loans: 6.28%
Note: All rates for federal student loans are fixed!
Conclusion
The concept of student loan interest has proved quite brutal to borrowers as a lot are already unable or just barely able to pay the loaned amount. However, for a lot of financially unstable students, the option of a student loan represents hope. There is no denying that student loans have aided a lot of people in completing their education, and for this reason, they may continue to be perceived as a saving grace to those who are financially down.