Category Archives: Interest On Defaulted Student Loan

To Reduce The Interest Paid On Defaulted Student Loan

capitalized interest student loan

 more about capitalized interest student loan

Taking a student loan is quite essential to complete our college education successfully. Since money is a major constraint in fulfilling our aspirations, taking a student loan can be considered as a real relief. This will help to meet all the expenses that you will encounter during the academic year. Since college fees are high, the student loans will help the students to complete their education without any difficulty.

After the completion of your studies, student loans would have to be repaid along with the interest amount. However, the matter would be quite different in case of a capitalized interest student loan. When you miss the repayment on a student loan, the interest paid would not be written off for that period and the interest that you have paid will be deducted. It will affect your payments later even if you do not make any defaults later.

Capitalized interest

If you fail to pay the interest amount, and if the interest is added to the amount that needs to be repaid, we can say that the interest is capitalized. In the case of a capitalized interest student loan, you cannot get the deduction for the interest amount. If you have taken a student loan, and have missed a few repayments, that interest will be added to the total payable amount and this will not be treated as a deductible student loan interest.

How to get eligibility for deduction of interest on student loan 

interest is capitalized

           Deduct capitalized interest student loan

Even if you pay your student loan without missing any repayments or if you default on the payments after completing a year, and if you want to deduct the interest amount, you will have to fulfill other requirements. The main requirement is that the amount that was given as student loan should have been used only for educational purposes and should not be used for any other purposes. The adjusted gross income should not exceed $75000 in case of singles and $150000 for joint applicants. It is found that the interest deduction is minimized to $2500 and it will be the same even when you have paid more interest on your student loan.

If you are found to meet these qualifications, you can apply for deduction on the capitalized interest student loan and you need not show it in your itemized deductions.

These are the different things that you need to take care, while applying for deduction on a student loan.