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education loan interest deductions: frequently asked questions

You are allowed a tax deduction for interest paid on certain student and parent loans.


How does the deduction work?

You may be able to claim an education loan interest deduction if you meet income and other eligibility guidelines. This deduction is an adjustment to income, so, if you qualify, you can claim it even if you do not itemize your deductions on Schedule A (Form 1040).


Where can I get more information about education loan interest deductions?

You may find it helpful to complete the education loan interest deduction worksheet contained in the instruction booklet for Form 1040 or 1040A. In addition, you may consult:

  • IRS Publication 970, Tax Benefits for Higher Education
  • IRS Web site for online copies of Publication 970 and other useful information
  • IRS by telephone at 800-829-3676 for publications and forms, or 800-829-1040 for questions
  • a tax professional, such as an accountant, tax preparer, or tax lawyer

Please do not contact VSAC for explanations of the requirements for, or instructions on how to calculate, any allowable deduction for the interest paid.


Which VSAC loan types are qualified education loans for purposes of the Taxpayer Relief Act?

These are qualified education loans:
  • Clover
  • Federal Consolidation
  • Federal Graduate PLUS
  • Federal Parent PLUS
  • Federal SLS
  • Federal Subsidized Stafford
  • Federal Unsubsidized Stafford
  • Green Mountain
  • HEAL
  • HEAL Consolidation
  • Paul Douglas Scholarship Loan
  • VAST
  • Vermont Advantage
  • VSAC Advantage
  • VSAC EXTRA Law
  • VSAC EXTRA Medical
  • VSAC EXTRA
  • VSAC Law
  • VSAC Medical

How will the interest be reported to me?

VSAC will send IRS Form 1098-E to you on or before January 31, 2014, if you have qualified VSAC education loans. Form 1098-E reports the amount of interest paid during 2013 for all qualified loans you have with VSAC. If your education loan is not a qualified loan type, you will not receive Form 1098-E.


Does the amount of interest reported in Box 1 include all possible amounts that may be deducted for loans made on or after September 1, 2004?

The amount of interest reported in Box 1 of Form 1098-E for calendar year 2013 includes payments attributable to loan origination fees and/or capitalized interest received on qualified education loans made on or after September 1, 2004. If your loan was made before September 1, 2004 you may be able to deduct additional loan origination fees and capitalized interest not otherwise included or reported in Box 1. For further information, see IRS Publication 970.


Do I need to file Form 1098-E with my federal tax return?

No. VSAC also reports the interest amount to the IRS.


I am also repaying other (non-VSAC) student loans. Will that interest be reported to me?

You should receive Form 1098-E for qualified education loans from each of your other lenders. For the Federal Perkins Loan, you should receive one from either your school or the Perkins Loan servicer. If you paid less than $600 in interest in 2013 on a qualifying loan, the lender is not required to send you Form 1098-E; however, you may still be able to deduct this interest. If you have any questions about non-VSAC education loans, please contact the organizations that service those loans.



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