form-w9s

I can’t speak for any other generation, but I know that Gen Y college graduates have incurred a lot of debt prior to graduation. Today I’m focusing on the private student loans that helped finance the expensive cost of education.

To be clear, private student loans are usually obtained directly through a bank and are not related to federal subsidized loans.

Examples of private student loans:

Examples of federal loans:

  • Stafford Loans (both subsidized and unsubsidized)
  • Parent PLUS Loans
  • Graduate PLUS Loans

Gen Y should know that student loan interest up to $2,500 can be deducted from federal income taxes by those who qualify. Federal loan lenders automatically send borrowers a year end statement of interest paid on federal loans for this purpose (Form 1098-E).

What many college grads don’t realize is that private student loans (which in my case amounted to much more than my federal loans) can also qualify for the interest deduction. The catch is that the borrower needs to certify to the bank that the loan was solely used for educational expenses.

How do I certify that my loan interest is qualified?

Use a W-9S IRS form to serve as the necessary certification.

To do: Go to the IRS website and download, fill out and print form W-9S . Mail this form ASAP (to your lender, not the IRS) so your lender receives it before Dec 31st. If your lender receives it before year end all of the interest on your loan paid from this year forward will now qualify for the deduction! Your lender will even send you a 1098-E statement of qualified interest at the end of each year.

This deduction is great for recent grads who are no longer dependents and have an adjusted gross income under $70,000 (borrowers are fully phased out above this level). Another great deduction for May 2008 grads is the tuition and fees deduction ($4,000!).

I hope this little extra knowledge goes a long way!


Related posts:

  1. Student Loan Repayment Options