Student Loan Interest: 2019 vs 2020

Yeah, yeah, yeah…I’m going to save my excuses. I’ve decided that if I get one post up per week then I am meeting my posting goal.

Saturday, while working university programming, I decided to try and multi-task and get my taxes done during the lulls. My taxes are pretty straight forward and I usually qualify for one of the free tax filing services. Initially, I began my federal filing with TurboTax, as I have the past five years. However, this year, to complete the forms necessary to claim the student loan interest tax deduction, the software prompted me to upgrade to the Deluxe version, which would have cost me $40.00 for my federal tax filing and $40.00 for my state tax filing. Ummmm…no. While I like the TurboTax software, and the ease of having some of my data from the previous year imported, $80.00 seems a bit excessive for such a simple return. It takes me less than an hour to file my taxes and my time is yet to be worth $80.00/hour. So, while I didn’t finish filing my taxes (I found other software that includes the educational tax forms in their free version), I did get close enough to being finished that I noticed the following:

Wow. So, I don’t know how it escaped my notice that in 2019, I paid $8,066.00 in student loan interest. This does NOT include the interest that accumulated on my federal student loans, which did not require payment on the income-based payment plan, and instead CAPITALIZED on my federal student loans. Ugh. Maybe I just didn’t want to notice?

In 2020, the onset of the COVID-19 pandemic significantly lowered interest rates and I only paid $2,519.00 in student loan interest. This was buttressed by the fact that in March 2020, the U.S. federal government created an interest and payment moratorium on federal student loans which meant the only interest that accrued on them, to be subsequently capitalized, is the interest that accrued between January and March 13, 2020.

For the 2020 tax year, the student loan interest tax deduction allows you to deduct up to $2,500.00 in interest paid from your taxable income. For obvious reasons, while not paying any interest is the best, the less you have to pay over $2,500.00 the better. This year, I was very fortunate. $2,519.00 in interest payments is not great by any means, but given the amount of my outstanding student loan debt, it’s not terrible. However, $8,066.00 in 2019 is ridiculous. This is the amount I actually paid to my student loan lenders. Two months of my GROSS income. I worked for two months in 2019 just to service student loan interest. Yea. …a slave to the lender.

I don’t really know what to say. Put in the terms above, I am so incredibly angry with myself, and sad. The most hopeful thing I can say in reflecting on that number is that 2019 is a peak on a downward slope.

8 thoughts on “Student Loan Interest: 2019 vs 2020

  1. wow! I wouldn’t be mad at yourself so much as I’d be mad at…the system or whatever. That’s an insane amount of interest and no wonder you couldn’t make much progress against the principal. You really are on a downward slope though, especially with plowing through the private loans, aka the worst. Have you tried tracking the amount of interest you pay each month and watching it decline? Or does it seem too depressing?

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    • “…the system or whatever.” – That is…complicated. But ❤ for your constant support.

      "…no wonder you couldn’t make much progress against the principal." – THIS!

      I have not thought about doing that…yet. In 2021, I began listing the net decrease AND the total amount paid each month in an effort to capture all of the "labor," including that lost to interest. Perhaps breaking it out would provide even more motivation?

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  2. As C said, maybe it makes sense to direct your anger not at yourself, but at a system that virtually requires debt if you want a college education and aren’t wealthy. Without trying to take away from how you feel, though, I do want to say, look at how this experience of being in, and paying off debt, is changing you. The fact that when you filed your 2019 taxes, you didn’t notice the amount of student loan interest you paid, shows how much more focused you’ve become since then. You are learning from this experience, and honing your resilience. I think you’re doing great. 🙂

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    • “…not at yourself, but at a system that virtually requires debt if you want a college education and aren’t wealthy.” – Again, that is…complicated. However, a ❤ for you too for your constant support. It's so appreciated.

      And thanks, Ellen. This experience has definitely made me a different person. Hopefully, if I am fortunate enough to have children, I can provide for them the way your are providing for yours. And if no kiddos, find another way to support affordable education in the U.S.

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  3. TurboTax is killing me. I’ve always used them to file but no thank you if it’s going to be $80 now. Have you tried Credit Karma? I hear they have completely free federal/state filing, but haven’t looked into whether they do student loan interest deduction for free too. What softwares have you looked into?

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    • “Turbo Tax is killing me.” O-kay…

      I haven’t tried Credit Karma. I used to have an account with them way back in the day when they just offered credit scores. Once the major credit card companies started offering FICO scores as a part of their card benefits, I deleted my Credit Karma account. I tried to look into it but I couldn’t see where it explicitly stated that the educational forms were free.

      A January 2021 review of TaxSlayer by The College Investor blog states, “TaxSlayer offers one free tier. It is only for people with W-2 income. It allows users to claim the Rebate Recovery Credit, education credits and the student loan interest deduction for free.” I am probably going to do a bit more digging but at the very least I am going to check them out. If I come across any others I will definitely update this comment (or maybe the post) and send you an email.

      https://thecollegeinvestor.com/20925/taxslayer-review/

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  4. For folks reading this at a later date… This is the most comprehensive review I have seen of the filing services that wasn’t overly complicated: https://thecollegeinvestor.com/17356/free-tax-software/

    I ended up choosing Credit Karma Tax over TaxSlayer because while the educational forms are free with TaxSlayer, the HSA forms are not. Credit Karma is a bit buggy and even though you are supposed to be able to import your W-2s, that function didn’t work for me. That being said, it produced the exact same refund as predicted by TurboTax without the $80.00 filing price tag so I filed with Credit Karma.

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