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You can take this deduction only if all of the following apply:

1. You paid interest in 2007 on a qualified student loan (see below).

2. Your filing status is any status except married filing separately.

3. Your modified adjusted gross income (AGI) is less than: $70,000 if single, head of household, or qualifying widow(er); $140,000 if married filing jointly. Use lines 2 through 4 of the worksheet below to figure your modified AGI.

4. You, or your spouse if filing jointly, are not claimed as a dependent on someone's (such as your parent's) 2007 tax return.

Qualified student loan
A qualified student loan is any loan you took out to pay the qualified higher education expenses for any of the following individuals:

• Yourself or your spouse.

• Any person who was your dependent when the loan was taken out.

• Any person you could have claimed as a dependent for the year the loan was taken out except that:

1. The person filed a joint return,

2. The person had gross income that was equal to or more than the exemption amount for that year ($3,400 for 2007), or

3. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's return.

The person for whom the expenses were paid must have been an eligible student. However, a loan is not a qualified student loan if (a) any of the proceeds were used for other purposes, or (b) the loan was from either a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan.

Qualified higher education expenses
Qualified higher education expenses generally include tuition, fees, room and board, and related expenses such as books and supplies. The expenses must be for education in a degree, certificate, or similar program at an eligible educational institution. An eligible educational institution includes most colleges, universities, and certain vocational schools. You must reduce the expenses by the following benefits:

• Employer-provided educational assistance benefits that are not included in box 1 of Form W-2.

• Excludable U.S. series EE and I savings bond interest from Form 8815.

• Any nontaxable distribution of qualified tuition program earnings.

• Any nontaxable distribution of Coverdell education savings account earnings.

• Any scholarship, educational assistance allowance, or other payment (but not gifts, inheritances, etc.) excluded from income.

Eligible student.   
An eligible student is a person who:

• Was enrolled in a degree, certificate, or other program (including a program of study abroad that was approved for credit by the institution at which the student was enrolled) leading to a recognized educational credential at an eligible educational institution, and
• Carried at least half the normal full-time workload for the course of study he or she was pursuing.

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See IRS Publication 970 for more information about student loan interest.