What's the Difference Between Education Tax Credits and the Student Loan Interest Deduction?

Both education tax credits and the student loan interest deduction can reduce your tax bill related to education costs, but they apply to different stages of paying for school. Education tax credits — the American Opportunity Credit and the Lifetime Learning Credit — apply to money you're paying for tuition and fees while the student is currently enrolled. The student loan interest deduction applies after school is over, reducing your taxable income by up to $2,500 of interest paid on qualifying student loans each year. You can't claim education credits and the student loan interest deduction for the same expenses, but they can apply to the same person at different times — credits while in school, the deduction during repayment. The student loan interest deduction phases out for higher earners, and you can't claim it if you're married but filing separately.