What Is the Student Loan Interest Deduction?

You can deduct up to $2,500 of student loan interest paid each year — and you don't need to itemize to claim it. This is an "above-the-line" deduction that reduces your AGI. The deduction phases out at higher incomes (check current IRS limits). Your lender will send you a Form 1098-E showing the interest you paid. Both undergraduate and graduate loans qualify as long as the loan was for qualified education expenses.