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Federal Stafford Loan Overview

November 20, 2011

Federal Stafford Loan

For those of you who don’t know much about the Federal Stafford Loan Program, it is part of the Federal Family Education Student Loan Program (FFESLP), that is funded by the governement, and can be applied for by filling out a Free Application for Federal Student Aid (FAFSA) where the loan amount you will get will be based off of your Expected Family Contributino (EFC). Stafford Loans provide the eligible applicant with the benefit of having a fixed interest rate throughout the life of their loan repayment, meaning if you begin paying on a 5 percent interest rate, you will pay every single payment on 5 percent until you have paid the loan back in it’s entirety. Federal Stafford Loans are offered for both undergraduate as well as graduate students, which below is an overview on each category.

Federal Stafford Loan

Federal Stafford Loan For Undergraduates

When an undergraduate receieves financial aid through the form of a Federal Stafford Loan, they can borrow form limits that range from $$2,000 to $12,500 each year of school which limits increase every year of school completed, which depending upon which year a student is in, and will have a loan experience that includes the below points, which are all applicable if a student agrees to enroll at in a minimum of a half time school schedule:

  • Loan deferment while in school, meaning the student doesn’t have to pay the loan off while in school.
  • Applicants do not have to have a good credit score, as Stafford Loans are not granted based of your credit score.
  • Rates start at as low as 3.4 percent, which are the lowest out of all the federally funded grant programs.
  • Loans come in the form of both subsidized, which loans are granted on the degree of your financial need as well as unsubsidized, meaning it is not based off of financial need.
  • Interest is paid starting when the student either graduates or drops out, and does not accrue, or buid up while they are in school.

Federal Stafford Loan For Graduates

For graduates applying for Stafford Loans, they are able to take out up to $22,500 per school year and also come in the form of subsidize and unsubsidized, where students again have to be enrolled in at least a half time school schedule. The loan experience will include:

  • Not having to pay loan payments while they are in school and begin usually at 6 months after graduation or dropping out.
  • No interest is charged while in school for subsidized loans, but for unsubsidized Stafford Loans, interest is either to be paid while you are in school, which is highly suggested, or let is accrue and pay it when you graduate. For examples sake, if one takes out $10,000 dollars, they will have to pay about $750 dollars in interest, which will accumulate on the loan total and one will have to pay interst on that as well.
  • Interest rates that are fixed and start at a minimum interest rate of 6.8 percent.

For the subsidized Staffor Loans, it is said that two thirds of the loans go to students who have Adjusted Gross Incomes that do not exceed $50,000 per year, while one fourth go to those who have Adjusted Gross Incomes between the range of $50,000 to $100,000. So if you meet these requirements, there is a good chance that you will be able to qualify for the subsidized Stafford Loan, which provides the benefit of coming with a much lower interest rate. But if not, you can still receive funding through the unsubsidized option. For either option, a 1 percent loan activation fee will be charged, where once you qualify for the loan, the money will be sent to your school and you will deal with your schools main office when you need funds for schooling costs.

For repayment of Federal Stafford Loan debt, there are 5 different repayment options, which include the standard repayment, extended repayemnt, graduated repayment, Income Based Repayement (IBR) and Income Contigent Repayment (ICR).

 

 

The Average Student Loan Debt & How To Get Out of It

November 18, 2011

Average Student Loan Debt

Average Student Loan Debt

As of 2011, the average student loan debt that seniors are looking at paying after they graduate is at an average of $25,250 which is higher than it has ever been, with debt averages that range anywhere from as low as $900 to higher than $55,000. New Hampshire holds the title of the state with the highest average debt, currently sitting a staggering $31,050 and the lowest debt average is in the state of Utah which has a median of $15,500 The average debt students incur is getting higher, due to many reasons, some which include sky rocketing tuition costs with some schools charging upwards of $40,000 per year, switching majors forcing more years in school among others. This debt is said to be from about 80 percent coming from federal loans and around 20 percent coming from private loans.

This average student loan debt for students can be dropped a little by applying for federal grant programs like the Pell Grant or the Supplemental Educational Opportunity Grant (FSEOG) among many others, through filling out a Free Application for Federal Student Aid (FAFSA) each year, but regardless, debt can accumulate fast throughout the 4 or more years of schooling. Considering this, you will need a game plan on how to knock out your debt as soon as you get out of college, which we have below for you are multiple different methods that you can utilize to knock your debt out fast.

  •  Save For Retirement – This may sound odd and absurd, but saving for retirement will provide you with tax deductions, which you can use the money in deductions toward your student loans. You can either enjoy watching your retirement funds stack up, or later on use them to get out of the average student loan debt pit. To start, you can enroll in a Registered Retirement Savings Plan (RRSP).
  • Student Loan Forgiveness – There are many great student loan forgiveness options that you can use. The two main types are working a public service job, which usually takes a commitment of working 10 years as well as 10 years of on time payment, which at the end of your repayment term the rest of your debt is wiped away, which is a great option for those with very high debt totals. The other most popular option is providing community service for organizations like Peace Corps and Americorps as well as VISTA, who will either pay a percentage of your loans off for each year of service or provide you with a lump sum each year of service which you can use towards getting out of the average student loan debt hole.
  • Pay Higher Than The Minimum – The minimum payment is set to keep you in debt for the longest time possible. If there are no repayment penalties, then do whatever you have to do to pay a higher payment than the monthly minimum as this will both save you money in interest you would have paid as well as get you out of debt faster.
  • Keep Living Like A Student – Be as frugal as possible, but in moderation. Live like you did in college but don’t forget to splurge a little.
  • Budget & Calculators – Another way get out of student loan debt is to budget exactly what you are spending and take out things that you don’t really need. You can also use repayment calculators to check how much you will save if you up the monthly payments with the funds you saved from cutting out the non essentials.
  • Employer Negotiation – Two options for this average student loan debt payoff category, one being you can try to negotiate a higher job salary, even a couple thousand dollars more a year than what they would originally offer, which you can drop on your loan debt. Two, you can try talking to your employer about them paying off some of your loan debt by agreeing to stay with them for a certain amount of time, or hitting certain numbers, etc.
  • Income Based Repayment – If you happen to be struggling with paying off your debt, it isn’t a get out of debt quick method, but can help you get of the student loan debt average. The Income Based Repayment (IBR) repayment option on federal student loans allow you to pay what is usually 15 percent of your monthly income to your debt, and can be as low as 5 dollars per month. There is also no repayment penalties on this repayment option, meaning that if you can afford to pay more later, you can do so without being hit with fees.

If you happen to still be in college while reading this average student loan debt article, it could be a great idea to get a job either part time or full time to help cover your expenses, which may be stressful, but you can consider taking a lighter load, which may result in a little more time in college, but a lot less to pay when you get out. You can also consider a work study job which are on campus jobs that help lower your cost of tuition. You can find out more by visiting your campuses main office. You can also consider putting a little bit of money towards your student loan debt while your are in school, like $100 per month or more if possible.

Direct Loan Consolidation Overview

November 17, 2011

Direct Loan Consolidation

Direct Loan Consolidation

Direct loan consolidation is a free service offered by the US Department of Education as a way to group all of your student loan debt into one single payment, and doesn’t require one to go through a credit check for acceptance. Consolidation of student direct loans can consist of loans programs that include; Federal Perkins Loans, Direct PLUS Loans as well as Federal Stafford Loans among near all other federal programs that offer financial aid. Direct loan consolidation was formed to both provide savings right away as well as long term, as well as provide stress relief by allowing one to only have to pay one payment instead of multiple.

Major Benefits of Direct Loan Consolidation

If you are looking to use direct loan consolidation for your student loan debt, it should be known that you should either be in the grace period provided by your lenders, or anytime after that during your repayment, as you cannot consolidate your direct loans if you are still in school. If you choose to consolidate your loans during the time of your grace period, then your grace period ends no matter how much time you have left on it, which it is suggested that you wait until your grace period is finished and then apply for consolidation. Some of the major benefits that come from using direct loans consolidation are:

  • One can enjoy a longer repayment period, which can be stretched out to up to 12 to 25 years, compared to the normal 10 year timeframe that is given for direct loans. Payments will be lower with this option, which means more interest is going to be paid in the long run, but there are no repayment penalties, meaning you can pay more than the minimum anytime you choose. Extended the repayment period has been shown to lower monthly payments by up to 53 percent.
  • Your credit score will actually go up by using direct loan consolidation as your loans will be registered as paid off as soon as you consolidate, which is view as a positive aspect by credit bureaus.
  • You will be paying on a fixed interest rate, meaning the the interest percentage that you are paying when you first start, will be the same amount until you last payment.
  • There is a possibility that the act of consolidation can actually provide a lower interest rate than that of what you are currently paying to lenders.
  • It offers flexible repayment options.
  • One can consolidate defaulted loans if in the event that they either; pay their debt off by using “income contingent repayment” or make “satisfactory repayment arrangements” through their current lender.
  • Health profession loans can consolidated as well, like for Nursing Student Loans or Health Education Assistance Loans among others.
  • You can also consolidate other existing loans that have been consolidated.
  • Multiple repayment options which include; standard repayment, graduated repayment, extended repayment, income contingent repayment and income based repayment, which you are able to switch repayment plans anytime during the life of your repayment term.
  • You can receive 0.25 percent off of your interest rate if you use their “Electronic Debt Account” which your payments will be deducted one time per month.
The entire process will usually take around 60 to 90 days to get started with consolidation, in which after the beginning of the process, one will have up to 180 days to add other loans in which they either forgot to include or left on purposely. If one chooses to use direct loan consolidation for other loans not consolidated the first time around, then they must apply for a new consolidation loan. It is also not applicable for married couples that are trying to do joint filing. The last thing your should keep in mind is that if you do choose to use direct loan consolidation while you are repaying loans, keep repaying your lenders until your lenders have contacted you informing you that the loans have been paid off.

Deduct Student Loan Interest Overview

November 16, 2011

Deduct Student Loan Interest

Deduct Student Loan Interest

If you are looking to deduct student loan interest, the first thing that you want to note is that you must fill out either a 1040 or 1040A From, where the student loan interst deduction section is the section called “adjustments to income”, or line 18 on the 1040A and line 33 on the 1040 Form.  To figure out how much interest that you paid on your student loans throughout the year, you will need a Form-1098 E which you can get by requesting one from the lender of your school loans, in which you will fill out Box 1 if in fact they did not send it to you, which is the case most of the time.

This form allow an individual to claim up to $2,500 in interest paid on student loans as you tax deduction. This student loan interest deduction rule currently applies to every person that is paying student loan debt to lenders, but as of the beginning of 2013, individuals with student loan debt will only be able to use student loan interested deduction during the first 5 years of repayment, which after this 60 month timeframe is over, one cannot file for student loan interest rate deduction anymore.

Deduct Student Loan Interest Rule

The above is a general overview of how to deduct student loan interest as well as what it can do for those who have compiled student loan debt. There are other certain rules and restrictions that apply, depending on what you annual income is. Below are the following rules for incomes:

  • If you are earning above 75,000 dollars per year, you can not use student loan interested deduction.
  • For those earning anywhere between $60,000 to $75,000 per year, then the interested that you have on your student loans will be what is called “prorated” which is where you will be partially eligbile to deduct student loan interest.
  • If you earn any amount less that $60,000 per year, than you are eligible to deduct interest amounts as high as $2,500. It is important to not file for any amount higher than $2,500.

If you happen to be a couple that is filing for student loan interest deduction, the same rules apply above where you will just add up the amount of income that the each one earns. For example say the couples income totals up to 130,000 per year, then they will be able to use the second option above. It should also be noted that you do not have to be the user of the loan funds to file, as you can file to deduct student loan interest for a spouse in the case that you are doing a joint deduction, or a dependent and of course yourself.

NOTE: You can also deduct student loan interest if you have either other itemized deductions or have not used any itemized deductions at all. If you are not sure what an itemized deduction is, they are essentially expenses that a US taxpayer can report when filling out their tax returns which allow a decrease in the persons taxible income.

 

National Student Loan Data System

November 9, 2011

National Student Loan Data System Overview

The National Student Loan Data System (NSLDS) is a federal database that consists of all student aid records an is run by the US Department of Education. The NSLDS enables individuals to access information pertaining to federal loans like the status of loans applied for, any outstanding balances as well as information on the disbursement of student loans, which have to deal with both Federal Perkins Loans and Federal Stafford Loans. They also make it career that other grant programs are kept on file through the National Student Loan Data System like Pell Grants, FFELP loans, Perkins Loans, PLUS Loans, Supplemental Loans, the Direct Loan Program as well as other all encompassing US Department of Education student loan programs.

National Student Loan Data System

Other National Student Loan Data System Services

Review of Financial Aid

In order to review information pertaining to financial aid provided by federal sources, students need to submit different personal information as well as other specifications which afterwards, you will be granted with a Personal Identification Number (PIN, which will be what you enter each time you want to access your National Student Loan Data System account. Once you create an account you will be able to monitor all the information on your loan(s) or grant(s) from the day you first start receiving funds, to the day you pay it off. In order to receive a gain access you will need to provide:

  • Your Social Security Number.
  • The first 2 letters in your last name.
  • Your birthdate.
  • Your PIN number.
The information you will be able to view after you become a member of the NSLDS site will include; the amount of your loans, which school the loan is for, the name of your loan holder and guarantor, as well as Pell Grant information like the amount awarded and schools that offer students the opportunity to receive Pell Grant funds.

“Loan Exit Counseling”

  • Their loan exit counseling program offers loan holders a tool that aids them in the completion of the “loan exit counseling requirements”.  This is offered through their main site where students can either use the tool by clicking “start” or learn more about the programs by clicking “tour”.
“Teach Grant Exit Counseling”
  • According to the NSLDS there are federal laws that state that those who have obtained a Teacher Education for College and higher Education Grant, also known as the TEACH Grant, must participate in a session for exit counseling either when the with draw or finish school. Same rules apply with either “start” or “tour” for the TEACH Grant exit program.
Correcting Incorrect Information
If in fact students find any information that is incorrect about their loans or grants, they are able to change it by following the steps below, which include changing information on various programs:
  • For corrections on FFELP loans, contact your loan guarantor.
  • For Perkins Loans as well as Pell Grant corrections, contact your school.
  • For all Direct Loans, inquire through the direct loan servicer.
All changes made to your account will show up in 30 days or less.

Private Student Loan Consolidation Providers & Overview

October 12, 2011

Private Student Loan Consolidation

private student loan consolidation

Major Overview:

  • By utilzing the act of private student loan consolidation, you are basically partnering with a company who will pay off all of your private loan providers, to provide the convenience of you only having to pay one payment, and that is to you consolidation provider. This is done by providing a consolidation loan.
  • Private student loan consolidation should be done sperately from federal student loan consolidation because you will lose the benefits that come with federal consolidation loans which are much better than private.
  • The term of your loan is reset when you use consolidation your private student loans, this often equates to lower monthly payments, but is done by providing a longer repayment period which means more interest paid. Although this can be avoided by finding a consolidation company that doesn’t charge a penalty fee for paying more than the monthly minimum.
  • You can consolidate one loan and still enjoy the benefits of consolidation.
  • Payments need to be made usually within 30 to 60 days after you start your private student loan consolidation contract.
  • Repayment periods usually last around 15 to up to 30 years and are a bit shorter for undergraduate students compared to the graduate student repayment period.
  • Active duty military members many recieve a deferment period of up to 36 months as well as medical and dental residents can be granted up to a 48 month deferment time.

Private Student Loan Consolidation Tips

  • Being that private student loans are credit based, in the event that your credit score is a lot higher since the time that you took out the private loans, you may be able to get a much lower interest rate with a private student loan consolidation company compared to what you are paying to your currrent lender(s).
  • Negotiating with your lenders is another viable option as they want your business and are looking to keep it at all costs, which can open up an opportunity to negotiate lower interest rate terms.
  • If you can find a co-signer with a better credit score than you do, this can be a great way to get a lower APR rate. After a couple years, the consoldiation balance can be tranferred from your co-signers name to your name where, they will submit your payment history to credit bureaus, and you can boost your own credit score.

Private Student Loan Consolidation Providers

If you are still looking to utilize private student loan consolidation, you can use these accredited providers to take advantage of the benefits.

  • Wells Fargo Private Student Loan Consolidataion – Interest rates are either fixed or variable, a 5,000 dollar minimum debt and 40,000 to 100,000 maximum, no activation fee, slight discounts for those who already hold an account at Wells Fargo as well as those who enroll in auto debit, variable interest rates range anywhere from +1.0-5.75+ which are Prime rates and for fixed rates 8.8-13.3 percent
  • NextStudent Private Loan Consolidation – Every quarter their interst rates vary, loan consolidatoin starts at 7,500 in private student loan debt to up to 300,000, offers up to 30 years for repayments and they do not charge any fees for higher repayment amounts.
  • Cedar Education Lending Private Student Loan Consolidation – Amounts range from 7,000 to up 100,000, 1 percent activation fee, after one year the cosigner can be “released” and the debt will be tranferred to the person who originally took out the loan.

 

Public Service Loan Forgiveness

September 12, 2011

Public Service Loan Forgiveness

Public Service Loan Forgiveness

First off, being that only loans under the Direct Loan Program as well as consolidated direc loans can qualify for Public Service Loan Forgiveness, if you have loan that isn’t a direct loan, then click here: Public Service Loan Forgiveness as this link will introduce you to Income Based Repayment (IRR) which can help you out more.

If in fact you do have a loan under the Direct Loan Program, Public Service Loan Forgiveness can be used on your loan debt. Public Service Loan Forgiveness which was established in 2007 under the College Cost Reduction and Access Act is when you work a job in the public service profession and make on time payments for 120 non taxed payments, or 10 years, and at the end of this 10 year term whatever is left on your student loan debt total will be wiped away and you will have a clean slate.

Qualifying loans include; Subsidized and Unsubsidized Stafford Loans, Direct PLUS Loans, as well as federal direct loans that are consolidated. NOTE: If you have a Perkins Loan, they can become eligible by consolidation under the Direct Student Loan Consolidation program, the same also applies to Parent PLUS Loans.

Public Service Loan Forgiveness Payment Options

In order to be able to participate in Public Service Loan Forgiveness, you must make payments through the following repayment methods:

  • Income Based Repayment Plan – This plan allows one to pay according to a percentage of their income, usually 15 percent as well as how big their family size is.
  • Income Contigent Repayment Plan – Very similiar to Income Based Repayment Plan.
  • Standard Repayment (Or any direct loan program equivalent) - This is where you pay payements that are enough to pay your loan off in 10 years.

Public Service Loan Forgiveness Qualifying Jobs

  • Government Organization (federal, private or state)
  • Children service agencies or family service agencies.
  • Certiani non profit jobs which need to be part of the Internal Revenue Code.
  • Tribal colleges as well as universities.
  • Services that include the following: Miltary, saftey of the public, law enforcement, law services of public interest, library jobs both public as well as in schools, education in public schools, health care services as well as emergency management. Jobs that are in low income areas where your services are needed most will most likely but eligible for Public Service Loan Forgiveness.

Publice Service Loan Forgiveness Conclusion

Publice Service Loan Forgiveness is great for people who have just gotten out of college and are looking to get into a job that qualifys for forgiveness. If you have been out of college for some time and have paid off some of your debt, it is probably a good option to not try for Publice Service Loan Forgiveness as you won’t be able to enjoy the maximum benefits of the program, the Income Based Repayment will be a better option for you. If you have high debt and are fresh out of college, then the program can save you thousand of dollars and many years of repayment.

If you are interest in participating in Public Serive Loan Forgiveness, contact your student loan lender directly who will give you infomration on what jobs can apply to you and how you can get started.

 

 

 

 

Federal Student Loan Repayment Options

September 10, 2011

Federal Student Loan Repayment

There are 5 different methods of federal student loan repayment that you can choose from when looking for a repayment plan that best suits your financial needs as well as how fast or slow you wish to pay off your loans. These plans can also be swtiched any time during your repayment process so you do not have to worry about being stuck with a federal student loan repayment plan that doesn’t fit your particular situation. Below are each repayment plan as well as all encompassing information on each.

Federal Student Loan Repayment

Federal Student Loan Repayment Options

First off this section will discuss the basic programs that are offered for each federal student loan, the next section will discuss specifcs about repayments offered through federal grant programs. Here are the federal student loan repayment options that you can utilize come payment time:

  • Standard – The standard federals student loan repayment option is one that will allow its borrower a timeframe of 10 years to pay back student debt. The payments are a bit higher then longer repayment plans, but will get you out of debt faster as well as you will save money because you will be paying less interest because of the shorter time frame of payment.
  • Extended – The exteneded federal student loan repayment method is one that allows you anywhere from 12 to 25 years to repay your loan. This method is available for borrowers who have over 30,000 dollars in debt. Payments are a lot lower than standard repayment, so this is for those who cannot currently afford a higher monthly payment.
  • Graduated – This method allows the borrower to start with a lower payment and have it increase every two years, which will give you the freedom of low payments right after college and higher payments down the road when you can afford them. This option can also be combined with the extended federal student loan repayment option.
  • Income Contigent – Income contigent repayment bases your monthly payments off of a percentage of your montly income, usually being 15 percent. So whatever you earn, no matter how much or how little, your payments will be at 15 percent of your income.

Federal Student Loan Repayment Specifics

Certain aspects apply to different federal student loan programs, here is an overview to these federal student loan repayment specifics.

  • FEEL Loans can also qualify for income contigent repayment where your montly payments must equal at least what you pay in interest each month.
  • Dircet loans provide income contigent repayment where your montly payments cannot go higher than 20 percent of the discretionary income that you earn. This option also allows one to pay as low as no payments at all if their income is very low, at which if they don’t pay off any part of the loan after the 25 year repaymen period, whatever amount is left on their debt will be considered income and they will be taxed on it.

 

 

 

If you are having trouble making your payments and are looking for relief, click this link: federal student loan repayment, where you find information on different student loan relief methods.

Student Loan Relief Methods

September 10, 2011

Student Loan Relief

Student Loan Relief Methods

First off, this aricle is on student loan relieft methods, if you are looking for methods to pay off your loan faster click here: student loan relief.

It doesn’t matter who you are, if you have student loans or student loan debt, it’s unfortubately a burden in which it seems like there is no light at the end of the tunnel. But before you abandon all hope, we have a few options, what are called student loan relief methods, that like it sounds, can provide you with some much needed relief when it comes to student loans. There are multiple methods of student loan relief that you can apply towards you debt that can help in many ways, and can be used simultaneously. Below are the options that you can use.

5 Methods Of Student Loan Relief

Here are the options you can use that can provide you with student loan relief:

Student Loan Forgiveness

  •  Student loan forgiveness is an excellent resource that allows you to either have a portion of your loan debt wiped away, or in some cases the entire thing forgiven. Student loan relief through forgiveness can be done thorugh many methods, some of which include volunteer work thorugh organizations like Americorps, Peace Corps and VISTA and they either pay a percentage off of your loan each year that you work for them anywhere from 15 to 30 percent per year, or provide you with a lump sum each year of service that you can use towards your debt. The other option is public service jobs which can result in percentages paid per year as well as forgiving your entire loan. This is where you work jobs in area of low income for specified amount of time, where your service is greatly needed. The best way to find out what student loan forgiveness can do for you would be to contact your loan lender.

Student Loan Consolidation

  •  This option can provide you with lower payments each month as well as grouping all of your loans together so that you only have to pay one loan payment each month. This student loan relief method can bring you lower payments as the consolidation company extends the repayment peroid so your payments are smaller over a longer period of time. If you are worried that this will take you too long, no need to worry, because as soon as you get out of the financial pinch and can pay more there is usually no penalty to do so. You can also enjoy the benefits of student loan relief through consolidation with just one loan, you don’t have to have multiple. Also, interest rates are generally lower with consolidation, but shop around first and make sure you get a lower interest rate compared to what you loans are currenlty at. Note private loans and federal loans can not be consolidated together.

Income Contigent Repayment

  • Income contigent repayment is another gerat option to consider when looking for student loan relief. This is an option of repayment on all payment plans that has your montly payments set at what is usually 15 percent of your income, and payments have been as low as 5 dollars in certain cases.

Loan Deferment

  • This option of student loan relief can be used for a variety of different reasons other than being in school which is the general reason of deferment. If you aren’t familiar with the term, it essentially means postponing payments on your student loan or loans for a short period of time. Some of the ways this can be done is through; economic hardship, disablity, public service jobs as well as matters related to your family, like pregnancy, attending to a loved one for a certain amount of time that requires that you stop working, caring for new borns as well as newly adopted children and more.

Student Loan Relief Conclusion

Like it was said above, the best thing to do now if you are interested in utilzing any of these student loan relief methods is to contact your lender and inquire about is with them as they will have the most up to date information on what can apply to your situation. By using these student loan relief methods, you can avoid the act of bankruptcy, which first off is very hard to qualify for and it stays on your record forever.

 

 

Student Loan Tax Deduction

September 10, 2011

Student Loan Tax Deduction

Student Loan Tax Deduction

Did you know that your interest on your student loans may be tax deductable? The Tax Relief Act rules are that you can deduct up to the amount of 2,500 dollars in the interest on you paid on your loan each year you are paying on it, done on your income tax return. This can be done by students paying interest on their loans, parents paying for their childrens loans and spouse payments, anyone who is is paying interest fees on their debt are eligible for student loan tax deduction (under certain qualifications, discussed below).

It is important to know that between the periods of 2010 and 2012, can can deduct up to 2,500 dollars whichever year of repayment you are in, but after 2012, you can only take part student loan tax deduction between the first 5 years or your repayment term.

Student Loan Tax Deduction Qualifications

  • You must be making under the amount of 55,000 to 70,000 dollars individually, or under 110,000 and 140,000 between you and your spouse. If you make these figures or above, you will be unable to qualify for a student loan tax deduction.
  • The student must have been enrolled in a schedule the was at least half time at your college, vocational school, training facility, etc.

Student Loan Tax Deduction Terms

  • You can use student loan tax deductions for many different parts of your schooling, some of which include, tuition, books, room and board, tranportation to and from your school as well as other general living expenses thorughout the year. This information must be proved to the IRS that you spent this money on the above expenditures.
  • If you and your spouse both have student loans you are paying on, you will need to file a joint tax return, which both can deduct up to 2,500 dollars each.

If you are interestest in utilizing student loan tax deduction you can either contact a personal tax preparer if you or you family has one, or you can contact one that is in your immediate area who will assist you in filling out the necessary information that is needed to be able to recieve tax deductions on your student loans.

Other Valuable Information

Also note that when filling out your tax return for you student loan tax deduction avoid using a 1040EZ form as this form doesn’t allow you to file for interest returns, you will want to either use a 1040 or a 1040A which both allow you to deduct on interest payments.

Like it was said above, you can do this each year after 2012 for the first 5 years of your repayment term. This can be a great way to get a lot of money back each year that can be utilized as a large payment on your loans. You should also take advantage of this 5 year timeframe if you are paying under 2,500 dollars a year on interest, and up the payments so that you do hit the 2,500 mark so that you can get more money back each year in student loan tax deduction funds.