Why did my student loan tax differ this year from last year when I paid the same amount?

[HelenaC · Accepted solution]

You pay the same amount but the interest is based on your outstanding loan value. As you pay your loan off each month, your loan amount gets smaller and the interest calculated is smaller. With the smaller interest, more of you monthly payment gets put towards your outstanding loan balance. This is how loan amortization works.

For example: You have a loan of $15,000 at 6.5% for 15 years. Your monthly payment is $131. See the screenshot of the Amortization Schedule to see as the Loan Balance goes down, the amount of interest goes down while principal amount goes up.

Note: Some of the monthly payment amounts are plus or minus $1. This is due to rounding. 

To enter your form 1098-E Student Loan Interest, click on Where do I enter student loan interest (Form 1098-E)?