RESTON, Va., March 3, 2008—Taxpayers who paid college tuition or interest on student loans for themselves or their children should ensure they are taking advantage of tax savings, says Sallie Mae, the nation’s leading saving- and paying-for-college company.

According to the College Board, 6.7 million taxpayers claimed about $4.2 billion in deductions for interest paid on student loans, generating between $600 and $800 million in tax savings last year. Sallie Mae advises taxpayers to read up on education-related tax deductions and credits that can yield big tax returns on your higher education investment and significantly reduce the amount you owe in taxes.

There are two education-related tax credits and two deductions available through the federal government. A tax credit reduces the amount of tax you owe dollar-for-dollar, while a tax deduction reduces the amount of income on which your tax is calculated.

• The Hope Tax Credit provides up to a $1,650 tax credit per eligible student each year. This credit can only be claimed for college freshmen or sophomores.
• The Lifetime Learning Tax Credit provides a tax credit of up to $2,000 per family for anyone in college. This may be used for any student in any year of college, graduate school or continuing education.
• The Tuition and Fees Tax Deduction has been extended through 2008 and can reduce taxpayers’ taxable income by as much as $4,000 for tuition expenses and related fees.
• The Student Loan Interest Tax Deduction can save student loan borrowers up to $2,500 when they claim their student loan interest paid during 2007.

“Education-related tax deductions and credits can help you get a cash return on your higher education investment,” said Martha Holler, spokesperson for Sallie Mae. ”When it comes to paying for college, every benefit counts. Let Uncle Sam help you cover some of the cost of college.”

Although there are some restrictions on how some of benefits can be taken in combination, the student loan interest deduction can be taken with any other education-related benefit.

Sallie Mae’s College Answer Web site has additional tools and information on these valuable tax benefits. Visit www.CollegeAnswer.com for more information.

In addition, taxpayers can call the Internal Revenue Service (IRS) help number at 800/829-1040, or read IRS Publication 970, “Tax Benefits for Higher Education,” available at the IRS Web site at www.irs.gov.

Sallie Mae advises students and parents to use the following 1-2-3 approach when saving for college via tax-advantaged 529 savings plans (such as www.Upromise.com) and using interest-free tuition payment plans (such as www.TuitionPay.com) are not enough to cover the full cost of a college or university degree:

1. Find free money first. Apply for financial aid that does not have to be repaid, such as scholarships and grants, by completing the FAFSA.
2. Consider federal student loans. Consider borrowing under the federally subsidized student loan programs, which provide consumer-friendly loan rates, benefits, and repayment options for students and parents. Parents and graduate/professional students can borrow up to the cost of attendance under the Parent PLUS and Graduate PLUS programs, respectively.
3. Use private student loans to fill any remaining funding gap.

For more information contact:
Erica Eriksdotter (703) 984-5628