Student Loan Interest Deduction Benefit -- Not so Impressive

According to an article on Student Loan Interest Deductions (cross checked with the IRS instructions), the maximum one can deduct from income for student loan payments is $2500/year paid to the interest on student loans.  For recent graduates, like me, that are pondering how to reduce my liabilities legitimately (like everyone else), I wanted to know what that means.

Well, basically, it means a tax savings of at most $625 -- for interest payments of $2500.


Of course, I could prepay such that the $2500 interest that I pay doesn't get capitalized into the student loan.  That'd mean I'd see a tax savings and a long-run savings of a reduced principle.  But, that also means I'd have to come up with that money before my first payment was actually due (so that payments down the road would be marginally reduced).


Welcome to the real world.  Congrats on that degree!

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