Student Loan Bill Caps Deductions at $2,500 Per Spouse for Separate Filers Starting 2025

The aptly named Student Loan Marriage Penalty Elimination Act of 2025 is trying to clear up a messy tax situation for married couples with student debt. Specifically, it targets how the student loan interest deduction works when a married couple chooses to file their taxes separately (the “Married Filing Separately” status).

The $2,500 Cap: What’s Changing

Starting with the 2025 tax year (taxes filed in 2026), this bill makes two main changes to the student loan interest deduction for separate filers, outlined in Section 2. First, it establishes a hard cap: the total amount of student loan interest an individual can deduct is limited to $2,500 per taxpayer. This is the key change. If you and your spouse are filing separately, each of you can potentially claim up to $2,500 in interest paid on your respective loans, provided you meet all other requirements.

Second, the bill clarifies that you can’t “double dip.” It explicitly states that you cannot claim this deduction if you are already deducting the exact same amount of interest under a different provision of the tax code. This prevents confusion and ensures taxpayers aren't getting two benefits for the same expense.

Who Benefits, and Who Might Feel the Pinch

The goal here is to eliminate a current wrinkle in the tax code often called the “marriage penalty,” where filing separately can sometimes lead to worse tax outcomes than filing jointly. By assigning the $2,500 deduction limit separately to each spouse, the bill aims to give separate filers a cleaner path to claim their deduction. This is a benefit for couples who file separately—perhaps due to income-driven student loan repayment plans or other complex financial reasons—and whose individual interest payments are under the cap.

However, there’s a catch for high-debt borrowers. If you or your spouse pay significantly more than $2,500 in student loan interest annually—which is common for those with high balances or high interest rates—this new, strict cap could actually reduce your overall tax benefit. For example, if you pay $4,000 in interest on your loans, you can only deduct $2,500 under this new rule when filing separately. While the bill aims to simplify things for separate filers, it also imposes a firm ceiling on the maximum deduction, which means less tax relief for those paying substantial interest.