The House Republicans' Tax Cuts and Jobs Act calls for nixing a number of what lawmakers called "special interest deductions" — including those for medical expenses, adoption and student loan interest. That puts the student loan interest deduction on the chopping block.
In 2015, more than 12 million borrowers included a student loan interest deduction on their Form 1040, according to IRS records. Those taxpayers represent nearly 3 in 10 of the estimated 44 million Americans with student loan debt.
Under current rules, borrowers can deduct up to $2,500 in interest paid toward qualifying federal and private student loans. (See infographic below for some of the ins and outs.) It's an "above-the-line" deduction on your Form 1040, meaning it directly reduces your taxable income — and you don't need to itemize to claim it.
The student loan interest deduction is subject to income limits, however. It begins phasing out for single individuals with a modified adjusted gross income (MAGI) of $65,000 and married-filing-jointly couples earning $130,000. Singles with a MAGI of $80,000 or more, and married-filing-jointly couples with one of $160,000 or more, can't claim the deduction, period.
"You get these forms from your lender, and then you find out you can't deduct the interest," Gavin Morrissey, managing partner at Financial Strategy Associates in Needham, Massachusetts, told CNBC earlier this year. "That happens with a lot of people."
Your repayment schedule also limits the value of the deduction. Graduates typically have a six-month grace period before student loan repayment begins, so the value of that loan interest deduction won't amount to much until the tax year following graduation. But then the value decreases in subsequent years as you pay down the loan and more of your payment goes toward principal rather than interest.
For many borrowers who can claim it, the student loan interest deduction doesn't amount to much. Looking at those 2015 IRS records, the average amount of interest is roughly $1,100, saving someone in the 25 percent tax bracket about $275, said Mark Kantrowitz, vice president of strategy for college and scholarship search site Cappex.com.
"If you were to claim the full $2,500, it would correspond to $625 reduced tax liability," he said.
But the loss of the deduction would still be an unwelcome hit. The loss of that break could have a ripple effect on other elements of your tax situation, because your taxable income is now that much higher, he said.
"You're looking not at people who have six-figure salaries. … You're looking at people who have middle salaries," Kantrowitz said.
Borrowers most likely to feel the full loss of the deduction would include recent graduates of either grad school or undergrad with "significantly above average" student loan debt and income below the phase-out threshold, Kantrowitz said. (By his estimates, a borrower would need undergraduate debt of roughly $54,000 at current rates, compared with the average $37,000, to hit that $2,500 interest max.)
Borrowers are likely to be upset about the deduction's elimination because it's a break pertinent to them, but given its low value, other elements of the proposed tax plan could have a greater impact on your final tax bill, said Kantrowitz.
"The real question for a lot of borrowers isn't going to be the loss of this particular deduction," he said. "It's, do I come out better with all of the changes or am I worse off?"
— CNBC's Darla Mercado contributed to this story.