Student Loan Interest Deduction & What’s Changed for 2026

What’s changed for federal student loans in 2026?

Starting July 1, 2026, the One Big Beautiful Bill changes federal student loan options for undergrad and grad borrowers with loans disbursing starting July1,2026. A few things to know:

You now have to pick a repayment plan

There are only two options for all new borrowers: the Repayment Assistance Plan (RAP) and the Tiered Standard Plan. They work differently depending on your income and balance. Skip the choice, and you’re defaulted into one automatically. Here’s a rough guide: 

• If your income is lower relative to your balance, consider RAP. The payments scale with income, so it can come out as the more affordable option. Payments can also be reduced by $50 per month based upon the number of dependents the taxpayer has. 
• If your income is solid relative to what you owe, and you want a predictable payoff timeline, you might want to go with the Tiered Standard Plan. This plan offers more options for the length of repayment ranging from 10 to 25 years.  

Grad borrowing is now capped

Grad students can no longer borrow up to their full cost of attendance — it’s now $20,500/year, with up to $50,000/year for professional students enrolled in certain legally defined programs.

PLUS loans for parents

There is now a $20,000 PLUS loan limit each year that can be taken by both parents combined. In addition, there is a lifetime limit of $65,000 per student.

If one parent takes out a PLUS loan of $40,000, and the other parent takes $25,000 over the course of their student’s years in college, then the parents cannot take out any further loans for that student since they have reached the lifetime limit for that student. However, if the parents have other children in college, the yearly and lifetime caps resets for each new student.

Lifetime student loan limit

One more change to be aware of with the new guidelines, student loans can never go over $257,500. This includes subsidized, unsubsidized, and PLUS loans for all borrowers. All of the changes above can affect how much interest you’ll pay, which is exactly what determines your deduction going forward.

Deducting student loan interest

If you’re already making student loan payments, this is one of the easiest deductions to miss. Here’s what to know before you claim it.

What is the student loan interest deduction?

The student loan interest deduction allows qualified borrowers to deduct up to $2,500 of student loan interest payments from their taxable income. 

If you qualify, you can take the student loan interest deduction whether you’re taking the standard deduction or itemizing your deductions.

Whether you can claim the full $2,500 depends on a few things, including:

• Your income
• Your filing status
• How much student loan interest you paid in 2025

Qualifying for the student loan interest deduction 

You may qualify for the student loan interest deduction if: 

• You have a public or private higher education student loan in your name
• You paid required or voluntary prepaid interest on a student loan in the year of the filing
• Your filing status is single or married, filing jointly (your status can’t be married, filing separately)
• You (or your spouse if you’re filing together) aren’t being claimed as a dependent on anyone else’s return

Just how much of the student loan interest deduction you qualify for will also depend on your modified adjusted gross income (MAGI). Here’s how it breaks down for 2026:

	Single filers (MAGI)	Joint filers (MAGI)
Full deduction	$85,000 or less	$175,000 or less
Partial deduction	Between $85,001 and $99,999	Between $175,001 and $204,999
No deduction	$100,000 or more	$205,000 or more

Not sure what your MAGI is? Don’t stress — tax software calculates for you.

How does the student loan interest deduction work? 

If you meet the qualifications above, there’s a good chance you can claim the student loan interest deduction. 

In 2026, if you paid:

• $2,500 or more in student loan interest, you can take the maximum $2,500 deduction.
• Less than $2,500 in student loan interest, you can deduct the exact amount of interest you paid. 

If you paid $600 or more in student loan interest, your loan servicer will send you Form 1098-E, which shows exactly how much interest you paid during the year.

Remember, this is a deduction — not a credit — which means it lowers your taxable income. 

That can reduce the amount of tax you owe.

Deductions, made easy

Some deductions are hiding in plain sight, while others can take a pro to find. Discover every deduction you qualify for — including student loan interest — and see how it impacts your return. Get started with TurboTax Deluxe.