Sponsors (9)
The bill substantially reduces tax burdens for many student‑loan borrowers by increasing the interest deduction, but it shrinks federal revenue and adds filing complexity while phasing out benefits for higher‑income filers.
Borrowers with student loans (especially middle-income families) can deduct up to $10,000 of student loan interest plus $500 per dependent—replacing the prior $2,500 cap—substantially lowering taxable income and tax liability for many borrowers.
Taxpayers and employers get a phased implementation (effective for taxable years beginning after Dec 31, 2025), giving individuals and payroll/tax systems time to plan and adjust.
Tax benefits phase out for higher‑income filers (MAGI above $125,000 / $250,000 joint), so gains concentrate on lower‑to‑middle incomes and create complexity and uncertainty for filers near the thresholds.
Expanding the deduction reduces federal revenue, which could increase the deficit or force offsetting spending cuts or tax increases elsewhere.
The new deduction formula and phaseout rules add complexity to tax filing and may increase demand for paid tax‑preparation services.
Based on analysis of 2 sections of legislative text.
Raises the student loan interest deduction to $10,000 plus $500 per dependent and phases it out above set MAGI thresholds.
Introduced February 12, 2026 by Daniel Goldman · Last progress February 12, 2026
Expands and raises the federal student loan interest deduction. The bill replaces the current $2,500 cap with a formula that provides a $10,000 base deduction plus $500 per dependent, and it phases the deduction out for higher-income taxpayers starting at $125,000 ($250,000 for joint filers). It updates rules for calculating modified adjusted gross income and makes related conforming changes, effective for tax years beginning after December 31, 2025. The change lowers taxable income for many borrowers who pay student loan interest, especially those with dependents and moderate incomes, while phasing out benefits for higher earners. It requires tax code updates but does not create new programs or direct spending.