Sponsors (9)
The bill substantially increases tax relief for many student loan borrowers (up to $10,000 plus $500 per dependent) and phases it in to allow planning, but it reduces federal revenue and adds complexity that concentrates benefits by income and may raise compliance costs.
Taxpayers with student loans (particularly middle-class borrowers and families with dependents) can deduct up to $10,000 of student loan interest plus $500 per dependent, substantially lowering taxable income and tax liability compared with the prior $2,500 cap.
The deduction change is phased in (effective for taxable years beginning after Dec 31, 2025), giving borrowers and employers time to plan and adjust withholding and payroll systems.
Taxpayers with modified adjusted gross income above the phaseout thresholds ($125,000 single / $250,000 joint) will lose or see reduced benefit, concentrating gains on lower- and middle-income filers and creating cliff/phaseout effects for those near the limits.
Expanding the deduction reduces federal revenue, which could widen the deficit or force spending cuts or tax increases elsewhere.
The new formula and phaseout rules add complexity to filing student loan interest deductions, likely increasing demand for paid tax-preparation help and compliance costs for filers.
Based on analysis of 2 sections of legislative text.
Raises the student loan interest deduction to $10,000 plus $500 per dependent with income-based phaseouts, effective for tax years after 2025.
Official title: To amend the Internal Revenue Code of 1986 to expand the deduction for student loan interest to include payments toward principal, and to increase the value of the deduction.
Introduced February 12, 2026 by Daniel Goldman · Last progress February 12, 2026
Expands and increases the federal student loan interest deduction by replacing the current $2,500 cap with a new formula: $10,000 plus $500 per dependent, with income phaseouts. It updates related definitions and cross-references in the tax code and makes the change effective for tax years beginning after December 31, 2025. The bill also modernizes timing references in the statute, pluralizes the qualified loan language to clarify deductible amounts paid on any qualified education loans, and adjusts related internal code references to ensure the deduction is available as an above-the-line deduction under Section 62.