A: Starting in 1998, you'll be allowed to deduct the interest you paid during the tax year on any qualified education loan. This deduction is "above the line," which means you don't have to itemize on your tax return to take advantage of it. The maximum deduction starts at $1000 and increases in the future:

Q: Which loan payments qualify for the deduction?

A: You can take the deduction for the first 60 months of interest payments due and paid after December 31, 1997. Education loans you took out before that date qualify for the interest deduction, but only for the first five years of payments under those loans.

Q: What are the eligibility requirements?

A: You can deduct the interest on any eligible loan you took out to pay the qualified higher education expenses for yourself, your spouse, or your dependent at the time you incurred the loan. However, if you used a home-equity loan to pay for college costs, and deducted interest on that loan as mortgage interest, you canít also take the education loan interest tax deduction.

Qualified higher education expenses generally include tuition, fees, room and board, and related expenses such as books and supplies. To qualify, the student must have attended an eligible educational institution at least half time. Furthermore, a student can't be claimed as a dependent by any taxpayer in the year the student claims the deduction.

If you're single, you qualify for the full deduction if your modified adjusted gross income is less than $40,000, and a partial deduction if your income is less than $55,000. If you're married and file jointly, these limits are $60,000 and $75,000 respectively. Above these thresholds, you're not eligible for any deduction.