If you have any aspirations to pursue higher education, tuition fees can play the role of an obstacle in your way. Unfortunately, there isn’t much that some students can do out of pocket, as most parents simply can’t afford it.
Some students manage to make it work with the help of scholarships and grants, but not everyone has access to them. Fortunately, all hope is not lost because student loans allow many people to get the education they need to enter the career they want.
Although it may not have been such a basic requirement in the past, many jobs seem unattainable without higher education. The idea of incurring a loan expense during college may seem like a deterrent, but it doesn’t have to be a disaster if you manage your loan well.
What is a student loan?
A student loan refers to any financing you receive for your education through a loan agreement. You typically receive the funds as you enter a school year and are required to start repaying them upon completion of your degree. While there are some cases where loans do not have to be repaid with interest or at all, you will typically be required to repay the loan in increments with interest added.
When you start a college, there are usually scholarship, grant, and loan options listed as financial aid. Of course, the smart thing to do is look at grants and scholarships first. Even if they don’t cover all of your tuition, they may cover enough to make any loans you may have to take out significantly less.
Many people want to imply that student loans fall into the “bad debt” category because millions of Americans now have student loan debt paid off. This is one of those things that you have to look at on a case-by-case basis. Debt may spiral out of control. However, if handled well based on your situation, it can be “good debt.”
Remember, you didn’t borrow money to splurge on something unnecessary. This is funding for education. This education may be why you become eligible for a position in your field of interest. It is an investment in yourself and your future.
There is no limit on income limit for student loan interest deduction amount.
The benefit of the deduction is known for a max of 8 years or till the stake is paid- whichever is before.
The tax benefits of your student loan do not end with these tax credits.
A deduction is also available on the income limit for student loan interest deduction for the interest payments you make when you start paying off your loan.
As of 2021, this deduction is available to the following taxpayers:
- Single filers with a MAGI of $85,000 or less
- Married taxpayers filing jointly with a MAGI of $170.00 or less
The amounts to be deducted are reduced for the following taxpayers:
- Single Taxpayers an Adjusted Gross Income between $70,000 and $85,000
- Married couples filing jointly with income between $140,000 and $170,000
The amount you can deduct is limited each year, and you can only deduct interest on student loans that you use to pay for school-related expenses, including your room and board.
Even if you use a part of the funds for other personal expenses such as financing your vacation, the deduction will not be completely lost; you should only reduce or prorate it according to how you use the funds.