Qualified Student Loans

To be reportable, a student loan must be either:

From a government program or a postsecondary educational institution; or
Certified by the borrower as a student loan incurred to pay for higher education.

Who Uses a 1098-E?

A financial institution, government unit, educational institution, or any other person who receives student loan interest in the course of a trade or business files Form 1098-E with the IRS.

Only the first recipient of interest must file. For example, a collection agent receiving payments on behalf of the lender must file.^[1]

Filers also send copies to the students who paid the loan interest.

Deadlines

The deadline to furnish a copy of Form 1098-E to the borrower, or payer of the interest on a student loan, is January 31. The deadline to file with the IRS is February 28, or March 31 if filed electronically.^[2]

1098 Series

The 1098 forms are used to report tax-deductible expenses to the IRS, ranging from interest on loans to donations. Each form is used for a different expense.

1098: Used to report interest payments related to a mortgage

1098-C: Used to report donations of vehicles to charitable organizations

1098-T: Used to report tuition payments for post-secondary education

1098-MA: Used to report payments from the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets

1098-E Form Parts (6)

Recipient’s Information

Enter the name, street address, city or town, state or province, country, ZIP code, and telephone number of the recipient of the interest, otherwise known as the lender of the student loan.

Recipient’s TIN

Enter the Taxpayer Identification Number (TIN) for the lender. This can be a social security number, individual taxpayer identification number, adoption taxpayer identification number, or employer identification number.

Borrower’s TIN

Enter the TIN of the borrower, or the student who took a loan out for tuition and paid interest on that loan.

Borrower’s Information

Enter the name, street address, city or town, state or province, and ZIP code of the borrower.

Box 1: Student Loan Interest

Enter the interest received during the year by the borrower, paid on one or more student loans.

Loan origination fees are one-time fees charged by the lender when a loan is made. Capitalized interest is unpaid interest on a student loan that is added by the lender to the principal balance of the loan. These were not required to be reported on Form 1098-E until September 1, 2004.

Therefore, if the loan was made after September 1, 2004, then this amount must include loan origination fees and capitalized interest received in the tax year. If the loan was made before September 1, 2004, then loan origination fees and capitalized interest need not be included or reported.^[3]

Box 2

Check the box if the interest reported in Box 1 applies to a loan made before September 1, 2004. This indicates that fees and interest are not included.^[4]

Instructions for Filers (6 Steps)

1. Obtain Donor TIN

Use Form W-9 to request the borrower’s TIN.

2. Obtain Form

Forms can be filed digitally or manually. Forms filed by mail must be ordered from the IRS website.

3. Complete Form

Complete the form. The IRS estimates that Form 1098-E will take seven minutes.^[5]

4. File Copy A with IRS

Copy A must be filed with the IRS, either digitally or manually. File with Form 1096, Annual Summary and Transmittal of U.S. Information Returns. If mailing both forms, do not fold them. Instead, send them in a flat mailer.

5. Send Copy B to the Borrower

Copy B of Form 1098-E should be sent to the borrower, either electronically or by mail.

6. Retain Copy C for Records

Keep Copy C for your records. The IRS recommends retaining tax records for three years.^[6]

Frequently Asked Questions (FAQs)

What do I do if I receive Form 1098-E?

Use Form 1098-C to complete your federal income tax return (Form 1040).

Are there penalties for overstating a deduction on student loan interest?

Yes. The IRS has a record, through Form 1098-E, of the student loan interest paid to the lender. If this figure does not match the figure on an annual income tax return, a negligence penalty or other sanction may be imposed.

Is student loan interest tax-deductible?

Yes, but you may not be able to deduct the full amount of reported interest. See Publication 970 and the Student Loan Interest Deduction Worksheet in the Instructions for Form 1040.

IRS Form 1098-E