Are college loan payments/interest deductible during the repayment period?

Example 1: Student graduates, and graduate now begins paying the loan payments. Is the interest being paid or the payments deductible?

Example 2: Student graduates or stops attending, and Co-signer/Parents now begins paying the loan payments. Is the interest being paid or the payments deductible for the Co-signer/Parents?

Iknowalotofstuff

In Canada or US???

Wondering401K

usa

ebaines

Generally yes, but it depends on your filing status and adjusted gross income. For your example 2, the parents can deduct the interest only if the student is their dependent. The max deduction is $2500, and that gets phased out if your income is too high. You can continue to deduct interest during the life of the loan even after the student has left school, as long as the loan qualifies as a student loan. See the following, especially section 4 starting on page 25:

http://www.irs.gov/pub/irs-pdf/p970.pdf

Wondering401K

Example 2 is the real scenario.
* Child graduates (or is no longer attending).
* Child is now over 23.
* Child is not a legal dependent for tax purposes.
* Child is not making enough to make payments.
* Parent (as co-signer) now must make payments.

The way I read the p970.pdf document, the answer is No for the parent, but Yes for the Child?

ebaines

The answer is: NO the parent can't take the interest deduction because the student is not a dependent, and NO the child can't take the deduction if s/he isn't the one paying the loan. If the parents are paying the loan, then there's no student loan interest deduction available for either.

Wondering401K

But once the Child becomes self-sufficient, and paying all loans herself, then they can?

ebaines

Yes. Also, take a look at the IRS publication I cited before -- page 28, Example 2 under "Interest paid by others." The student can indeed deduct interest that was paid by someone else - the parents in this case - as long as the loan meets the other requirements. So I stand corrected!

Example 2. Ethan obtained a qualified student loan to attend college. After graduating from college, the first monthly payment on his loan was due in December. As a gift, Ethan’s mother made this payment for him. No one is claiming a dependency exemption for Ethan on his or her tax return. Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return.