As a student and recipient of student loans, I’ve been collecting huge sums of debt. Before I started Frugaling.org, I had amassed about $37k between car, credit, and financial aid. Thankfully, that recipe for disaster was turned around when I began writing about my new, frugal life.

Student loan interest is deductible!

I saved and made more money than ever in 2013. Despite being a full-time graduate student (at around 60 hours per week), I started making enough money to pay back my student loans. By the end of 2013, I paid off $1,785.46 of interest (just interest) owed on my student loans.

The IRS and tax code stipulates that a recipient of student loans is granted up to $2,500 in deductions from the payment of student loan interest. Again, this is only the interest that has been gained on the loans – not the principal that was originally lent. Moreover, if you make over $75k ($155k if married) in adjusted gross income (AGI), you do not qualify for this deduction. You can find out whether you qualify for the deduction here.

The use and importance of Form 1098-E

Every year that you are paying student loans, you end up contributing a certain amount in interest. In return you will receive a little golden ticket (Form 1098-E) that allows you to deduct some income tax. All you have to do is enter the corresponding boxes on a program like TurboTax and you’ll magically see a sizeable refund add up.

Pair a nice deduction with Amazon’s TurboTax bonus of 10% on this year’s refund, and you’ll be flush with cash come return season!

Here’s a link to this year’s official IRS Form 1098-E.