Your student loan interest is an adjustment to income, so it lowers your taxable income. It is not deducted from your tax liability.
Student loan interest and other adjustments are deducted from your total income. The result is your adjusted gross income (AGI). Your personal exemptions and standard deduction (or itemized deductions) are subtracted from your AGI. The result is your taxable income. Your tax liability is based on this value.
