If you’re a college student or graduate, chances are better than half that you have student loan debt. Three-quarters of all college students in the United States finish school owing a balance on student loans; that number continues to grow as college itself gets more expensive.

As you graduate and start your professional life, however, you’re probably wondering how those loans fit into your bigger financial picture. If you’re trying to get a car loan, for instance, do student loans count as income or debt? What about with taxes? Are student loans taxable?

The truth is that student loans are always debt—but there are certain situations in which having that debt can still help you. This article will take a look at a few scenarios you might find yourself in and explain how to handle them.

Are Student Loans Taxable Income?

The Internal Revenue Service sees student loans as income, but you won’t pay taxes on them. In fact, much of the interest is deductible as an adjustment, depending on your other income. You can deduct up to $2,500 in paid student loan interest or the amount you actually paid—whichever is less.

For a rough estimate, you can multiply the amount of student loan interest you paid by your tax bracket. If you paid $500 in student loan interest and are in the 22% tax bracket, you can expect about $110 in tax savings. The maximum you’ll save is about $625, according to Forbes.

In order to be eligible to take that deduction, you’ll need to meet a few criteria:

  • You paid interest on a qualified student loan in the tax year in question
  • You’re legally obligated to pay that interest (you are in the repayment phase)
  • You did not file married but separately
  • Your modified adjusted gross income, or MAGI, isn’t over the limit (this changes each year)
  • You or your spouse cannot be claimed by anyone else as a dependent
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If you meet the criteria above, you can start looking at deducting your student loan interest in the next tax season.

Student Loans on Credit Applications

Lenders look at student loans as debt, although it’s not quite the same as a car loan or mortgage when looking at your credit report. If you’re looking to get credit for a large purchase, the lender will look at your payment history—which is 35% of your credit score—and whether you’re making those payments on time.

Lenders do not consider loan disbursements as evidence of ability to pay, which is the main reason credit card companies and other lenders want to see your income. But you’ll want to check with the specific lender that you’d like to use and ask what their policies are before applying for credit with them.

If your financial aid is made up of scholarships, grants, or federal work-study funds, then you report those disbursements as income. Are student loans considered income? Not normally.

Student Loans on a FAFSA

If you’re filling out a FAFSA, whether as a student or the parent of one, you’ll need to report if the student is receiving any student loans (such as from the previous year). Since loan proceeds do not get counted as income, they will not skew your financial picture or make you look like you have more income than you truly receive.

Unlike income, you’ll have to eventually pay off your student loans. Furthermore, it might mean you don’t get the car loan or credit card you wanted if you are using your loans for living expenses. But it also means you won’t have to pay taxes on that money or have those loans artificially inflate your income numbers for your next financial aid package.