Why did my federal refund decrease so much when I put in the student loan interest I paid?

[amwebb11]

My federal refund was at a couple hundred dollars and then when I put in the student loan interest that I paid my AZ refund went up, but my federal refund went down to $52. Why is that?

[ClarkeB · Accepted solution]

Only $2,500 of student loan interest can be reported on a federal tax return. 

The student loan interest is entered as an Adjustment to Income, not a tax refund or credit. 

An adjustment to income reduces the Adjusted Gross Income thereby reducing the amount of taxable income.