Save money on student loans after college

Once you’re out of college, there are many ways to lower your student loan payments. Whether you choose to deduct some of its interest or cancel it, you need to know if you qualify to do so.

Deduct the interest on your student loan

If you have a student loan that was used for higher education, there’s a chance you can get a special deduction on its interests. Another requirement is that your loan must’ve been taken out to cover only qualifying educational expenses, such as tuition, fees, transportation, room, supplies, and more. As long as this loan was used for you, your spouse, or a dependant of yours, you can deduct its interest.

Your Annual Gross Income (AGI) will change the amount of interest you’re able to deduct from your student loan payments each year. The maximum deduction is $2,500. If your modified AGI, as a single filer, is $70,000-$85,000, this amount is gradually reduced to zero. For joint filers, this happens if their modified AGI is between $140,000 and $170,000.

If your parents currently pay for your student loans and you’re not claimed as a dependant, you can deduct the interest on the amount paid, as you’re the one paying off the debt in the eyes of the IRS. Since this deduction is claimed as an adjustment to income, you don’t need to itemize in order to claim it on your tax return.

Follow these tips to survive your tax returns!

Cancel your student loan

The first way to cancel your student loan is pretty extreme: it’s saved for cases of death or total and permanent disability. This will also prevent the cancellation to count as taxable income. In other words, student loans allow you to avoid debt in a cancellation of this kind, as opposed to many other types of loans.

You may also cancel your student loan debt once in accordance with a loan provision. If it states that your debt will be canceled once you’ve worked in a certain profession, for a specific period of time, and with a particular employer, you can enjoy a tax-free cancellation of your debt, provided that you’ve met these requirements.

There’s also the possibility to get a cancellation by working for the educational institution or organization where you got the loan or funds. Always check with the company before taking this option for granted, though! Keep in mind that you’ll be taxed on the amount you cancel.

Consider these financial tips that’ll help you save money in college and later in life!

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