About 40 million Americans owe a collective $1.2 trillion in student debt, and yet more than half of Americans aren't aware of the tax benefits that apply to student loans -- namely, that in certain situations, the interest paid on student loans is tax-deductible. Considering that the average 2015 graduate with debt owes upward of $35,000, that's a load of tax savings just waiting to be claimed.

Tax deductions for student loan interest

If you're paying off student loans, you should know that up to $2,500 in interest may be tax-deductible. If you qualify, you can claim your deduction as an adjustment to income, which means you don't need to itemize your deductions. Considering that taxpayers are more apt to take the standard deduction when filing their taxes, this is a big plus.

But of course there's a catch. You'll need to meet certain criteria in order to qualify for the deduction. First, your loan must have been used to pay for qualified educational expenses (like tuition, fees, and books) at an eligible institution. Additionally, you must have been enrolled at least half-time in a program that led to a degree or certification. Furthermore, if your tax status is married filing separately, you won't be eligible. You also can't be claimed as a dependent on someone else's return, which means that if you moved back home after college and your parents are claiming you as a dependent, you won't be eligible for a tax break on the interest you're paying.

Income limits for eligibility

For the 2015 tax year, the amount of student loan interest you can deduct is the lesser of $2,500 or the amount of interest you actually paid. But like so many tax benefits, this one is subject to an income-based phase-out. For 2015, the phase-out begins once your modified adjusted gross income (MAGI) hits $65,000 if you're filing a single return, or $130,000 if you're married filing jointly. Once your MAGI hits $80,000 as a solo filer, or $160,000 for a joint return, you can't claim a student loan interest deduction at all. So if, for example, your MAGI for 2015 was $50,000 and you paid $2,000 in student loan interest, your tax savings will equal roughly $500.

Now if you're wondering whether you'll need to hunker down with a calculator to figure out your interest totals for the year, fear not. Anyone who pays $600 or more in interest on a qualified student loan will receive a Form 1098-E, and that nifty little document will spell out exactly how much interest you shelled out. If you don't receive this form, it could mean that you paid less than $600 in interest -- but that doesn't mean you lose out on the deduction. It just means you'll have to request that information from your lender for tax purposes. Furthermore, if you're deemed eligible for an income-based repayment plan, where your loan payments are based on your earnings rather than your balance and interest rate alone, you can still take advantage of the tax deduction.

These tax savings definitely ease the burden of student loans, but bear in mind that paying your loans off early will save you much more than an annual tax deduction. Think of this tax deduction as a consolation prize until you can finally put those pesky loans behind you.