Pallavi is an editor for CNET Money, covering topics from Gen Z to student loans. She’s a graduate of Cornell University and hails from Atlanta, Georgia. When she’s not editing, you can find her practicing bookbinding skills or running at a very low speed through the streets of Charlotte.

Repaying student loans is a massive undertaking, and one that often continues years after your graduation. They can affect your financial independence and your standard of living. One area of impact, both positive and negative, that is often overlooked are your taxes.

Student loan interest deduction

When you make monthly payments to your student loans, that includes your principal payment as well as your interest payment. Whether you have private or federal student loans, the student loan interest deduction lets you reduce your taxable income up to $2,500 a year — although you might only qualify for up to the amount you paid in interest, which might be less than $2,500.

You’re eligible for the deduction if you paid student loan interest last year and you aren’t filing as “married filing separately.” If you and your spouse are filing jointly, neither of you can be claimed as a dependent on someone else’s return.

Reducing your taxable income can help lower how much you owe the government or increase how much you’ll get as a refund. You might get placed in a lower tax bracket, which might qualify you for other deductions and credits.

American Opportunity Tax Credit

The American Opportunity Tax Credit is for first-time college students during their first four years of higher education. The AOTC is 100% of the first $2,000 of qualified education expenses for each eligible student, then 25% on the next $2,000.

To claim the full credit, your modified adjusted gross income must be $80,000 or less. If your MAGI is between $80,000 and $90,000, you can still qualify for the credit, but you’ll get a reduced amount.

If the credit lowers your income tax to less than zero, you might be able to get a refund on your taxes or increase your tax refund.

Lifetime Learning Credit

You can earn money back for qualified education expenses through the Lifelong Learning Credit. The LLC can help pay for any level of continuing education courses (undergraduate, graduate and professional degrees).

Unlike the AOTC, there’s no limit to how many years you can claim the credit. You could get up to $2,000 every year or 20% on the first $10,000 of qualified payday loans Maryland education expenses. You can use the credit to lower your tax bill, but you won’t get any of the credit back as a refund.

COVID-19 student loan deferment

Normally, if you have federal student loans in default (meaning you’re unable to pay what you owe on them for 270 days), your tax refunds can be taken to pay what you owe. However, this tax season, federal student loan deferment has been extended through . This puts student loan payments, interests and any collection activities, including taking your federal tax refund to pay your defaulted student loans, on pause. So, until May 1, your federal tax refunds are safe.

Your taxes determine your student loan payments

If you’re repaying federal student loans, including those on an income-driven repayment plan, your marriage status can impact your payments. For instance, if you’re married filing jointly, your payments are based on the new joint income between you and your spouse. If you’re married filing separately, your payments are based on only your income.

The Revised Pay As You Earn, or REPAYE, plan doesn’t distinguish between whether you’re listed as married filing separately or married filing jointly. Your payments are based on the income of both you and your spouse.

While you might get a little bit of a break if you’re married filing separately, you could miss out on other benefits. You may not be able to take advantage of a lower tax rate for married couples and claiming credits and deductions.

But if you do file jointly, the government can adjust your payment if both you and your spouse are making repayments to your federal student loans.

While using a credit card to pay bills is quite common, you shouldn’t go for this option without a second thought. This form of payment https://getbadcreditloan.com/payday-loans-md/ may be convenient for several reasons, but there is one drawback that you need to be aware of. When you use credit cards to pay accumulated bills, or you use them too frequently, you can easily damage your credit score as a result . That’s why it’s better to try with some other options first.

Should I apply for a loan to pay the bills?

Loans to help pay bills should be the last option to take into consideration. You need to look at the big picture here. While applying for a loan to help pay bills might sound tempting at the moment, this option can only cause you more trouble in the long run.

Don’t forget to check for the most common errors

Quite a few people out there are paying bills without even realizing what exactly they’re giving their money for. They’re not reading their billing statements carefully enough to spot potential errors, so they might as well pay someone else’s bill without realizing so. To avoid this, you need to pay attention to every single thing listed, starting with billing information (name, address, billing date, etc).

Another potential scenario is that there are duplicate items . If just a single service is charged twice, that’s enough to make your bill suspiciously high.

Speaking of services, you should also check if you’ve actually used everything you’re being charged for. There might be a service you’ve never received that’s making you feel dizzy looking at the total amount.

DoNotPay can send an extension letter on your behalf

If your income cannot cover your monthly bills, one of the easiest things to do is to ask for an extension date. Many people do this, and many providers approve such requests when there’s a valid reason. If this will solve your issue, too, here’s what you can do to ask for an extension:

• Contact customer service
• Ask for an extension in person
• Send a letter

If you’re thinking about sending an extension, but you’re not sure how to compose it, there’s nothing to worry about- DoNotPay is here to write an extension letter for you. We will need just a little bit of your help. You should provide your personal information and tell us who your service provider is. Since they will want to know on what grounds you’re asking for an extension, we will also need you to tell us a bit more about your situation. Then our app takes over. DoNotPay can send an extension letter on your behalf, too.

Rely on DoNotPay to ask for a waiver on late fees

Another convenient option if you’re struggling with your bills is to ask for all late fees to be waived. If you choose this solution, you can do the following:

• Go to your service provider in person
• Contact customer support
• Turn to a lawyer or financial advisor for help
• Send a waiver letter

Many would jump to the conclusion that asking for professional assistance is the most reliable option. While experts are the most reliable, they are usually quite expensive, too. This doesn’t bode well for you now that your income is not sufficient to cover bills, let alone some additional expenses. What if you could get legal assistance for free? You can when you use our app. DoNotPay is the world’s first robot lawyer, and you can get the help you need free of charge. Our app can generate a letter asking for all late fees for your bills to be waived and then send it on your behalf .