If an undergraduate full-time student borrows (with the formal loan agreement & repayment schedule etc.) from her parents instead of from Stafford loan, will the interest on such loan be deductible for tax purposes?
Thank you for your insights
Student loan interest deductibility if borrowed from parents?
Apr 18, 2014
4 Replies
No, it is not a "qualified student loan" as it is from a related party.
Besides, even if it were, then the interest income would have to be reported as income on the parent's tax return. This might mean earn $25 saved by the student, but $100 extra for the parent or something like that -- depends on the numbers.
I believe the interest income is reportable by the parents regardless of whether the interest paid can be deducted by the student.
OK, but the parents should pay the educational costs directly. No need to worry about interest, imputed interest, gift tax, etc.
Join the Discussion
Have something to add? Share your thoughts — no account required.
Didn't find your answer?
Ask the community — no account required