The GRADUATE Act expands the federal tax deduction for student loan payments to include both interest and principal payments, rather than just interest alone. Currently, borrowers can deduct up to $2,500 in student loan interest per year, but this bill increases the maximum deduction to $10,000 plus an additional $500 per dependent, making it significantly more valuable for families managing education debt. The deduction would phase out for higher-income earners (those earning over $125,000 for single filers and $250,000 for joint filers), with a gradual reduction over a $25,000 income range. These changes take effect for tax years beginning after December 31, 2025, meaning taxpayers would first benefit from the expanded deduction on their 2026 tax returns. The bill is intended to provide meaningful tax relief to borrowers paying down student loans while supporting educational affordability.
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