The GOP tax plan would ax the deduction for student loan interest

House Republicans released their tax overhaul plan Thursday, proposing a number of major changes to the decades-old code. Part of the bill, for example, calls for the elimination of so-called "special interest deductions," such as a tax credit for adopting children or an "itemized deduction for medical expenses, a crucial provision to households with extraordinary health-care costs," The Wall Street Journal writes.

The special interest deductions category also includes the deduction for student-loan interest. As the rules stand now, qualifying individuals are able to deduct up to $2,500 in interest paid toward federal and private student loans, CNBC reports. While there are certain income restrictions that go along with that, the deduction as it stands now counts as "above-the-line," applying directly to taxable income. In 2015, 12 million people used the student loan interest deduction on their 1040 forms.

For most people, the loss of the deduction under the GOP bill, if it passes, won't be a huge hit. It will affect graduate students or undergrads with exceptional student loan debt and low incomes much more: To hit the $2,500 interest cap, a borrower would need to have $54,000 in undergraduate debt. Otherwise, CNBC writes that "looking at … 2015 IRS records, the average amount of interest is roughly $1,100, saving someone in the 25 percent tax bracket about $275."

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Still, that's not an insignificant amount of money to someone freshly out of college — it's the equivalent of almost 15 avocado toasts. Read more about what the GOP tax plan means for people with student loans at CNBC.