Definitions for the Student Loan Interest Deduction


Qualified Student Loan
Qualified Education Expenses
Adjustments to Qualified Education Expenses
Covered Period
Effect of Refinancing


Qualified Student Loan

To claim the Student Loan Interest Deduction, the interest must be paid on a "qualified student loan."  According to IRS Publication 970:  Tax Benefits for Higher Education [download], a "qualified student loan" must have been taken out solely to pay "qualified education expenses" that were:

See "Qualified Student Loan"in Chapter 4 of Publication 970: Tax Benefits for Education [download] for more information.

"Qualified education expenses" are treated as paid or incurred in a "reasonable period of time" if they were paid with the proceeds of a student loan belonging to a federal postsecondary education loan program.  Examples of such loans at UCI are the Federal Perkins Loan and the Federal Direct Student Loans.  Otherwise, the "reasonable period of time" extends 90 days before the start, through 90 days after the end, of the academic period to which the "qualified education expenses" relate.  See "Reasonable period of time," in Chapter 4 of Publication 970: Tax Benefits for Education [download] for more information.

An "eligible student" is one who was "enrolled at least half-time" in a program leading to a degree, certificate, or other recognized educational credential.  A student who is taking at least half the normal full-time workload for the required course of study is considered to be "enrolled at least half-time."  At UCI, a student must be enrolled in 6.0 units or more to be "enrolled at least half-time."  See "Eligible student" in Chapter 4 of Publication 970: Tax Benefits for Education [download] for more information.

Not all loans are "qualified student loans," even if they were used to pay for "qualified education expenses."  If the loan was obtained from a related person (such as your spouse or parents), or was made under a qualified employer plan, then the interest paid on this loan may not be used for the Student Loan Interest Deduction.  See "Related person" and "Qualified employer plan" in Chapter 4 of Publication 970: Tax Benefits for Education [download] for more information.


Qualified Education Expenses

In general, "qualified education expenses" are the total costs of attending school.  These expenses include:

See "Qualified Education Expenses"in Chapter 4 of Publication 970: Tax Benefits for Education [download] for more information.

Note that the definition of "qualified higher education expenses" for the Student Loan Interest Deduction differs substantially from the definition of "qualified education expenses" for education tax credits.  Room and board, transportation, and personal expenses are specifically excluded from the "qualified education expenses" allowed for the Hope and Lifetime Learning credits.


Adjustments to Qualified Education Expenses

In general, the amount of a student's "qualified education expenses" is equivalent to the cost of attendance, which is determined on an annual basis by the Office of Financial Aid and Scholarships.  However, the IRS advises taxpayers that they must reduce their "qualified education expenses" by the total amount paid for those expenses with the following forms of tax-free educational assistance:

See "Adjustments to Qualified Education Expenses" in Chapter 4 of Publication 970: Tax Benefits for Education [download] for more information.


Covered Period

Originally the Student Loan Interest Deduction was allowed only for interest due and paid on a "qualified student loan" during the first 60 months, or "covered period," that interest payments were required under the terms of the loan.  The "covered period" began on the first day of the month for which an interest payment was required, and continued until 60 months later -- whether or not interest payments actually were made.  However, the "covered period" could be suspended during periods of deferment or forbearance, as long as no payments were required.

Following the passage of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, the "covered period" was eliminated.  Starting with tax year 2002, you can deduct all interest paid on a "qualified student loan," even if the "covered period" has expired, or the interest payments are not required.  For more information, see "When Must Interest Be Paid" in Chapter 4 of Publication 970: Tax Benefits for Education [download] for more information.


Effect of Refinancing

Interest may be deductible for refinanced loans, including:

If you refinance a "qualified student loan," then the new loan is also considered "qualified" only if it is used solely to pay "qualified education expenses."  If you use any portion of the proceeds of a refinanced loan for another purpose (such as buying a car or making home improvements), then you cannot deduct any interest paid on the refinanced loan.  See "Interest on refinanced student loans" in Chapter 4 of Publication 970: Tax Benefits for Education [download] for more information.


The information provided in this web page is NOT tax advice.  It is offered only as general information for UCI students and their families.  Please consult a qualified tax expert for advice on computing, claiming, or determining qualification for any tax benefit mentioned in this web site.


Further information is available from:

Internal Revenue Service

Internal Revenue Service
(800) 829-1040 or TTY/TDD (800) 829-4059
Publication 970:  Tax Benefits for Higher Education
Tax Topic 456:  Student Loan Interest Deduction
FAQ:  Student Loan Interest Deduction
Tax Trail:  Student Loan Interest 

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