Can personal loans for tuition get tax deductions like official student loans?

nope, has to be qualified student loan. personal loans dont count even if u use it for school

I did the same thing last year!!! The loan has to be a "qualified student loan" to get the tax deduction. I learned this the hard way when my tax guy said my personal loan interest wasn't deductible even though I had receipts showing it all went to tuition. Something about IRS Publication 970 that says the loan has to be SPECIFICALLY for educational purposes in the loan agreement.

Financial aid advisor here. This is correct - the IRS is very specific about what qualifies for the student loan interest deduction. For a loan to be considered a "qualified student loan" eligible for tax benefits: 1. The loan must have been taken out solely to pay qualified education expenses 2. The loan cannot be from a related person or made under a qualified employer plan 3. The student must be you, your spouse, or your dependent 4. The student must be enrolled at least half-time in a degree program A personal loan, even if 100% of the funds go toward education expenses, does not qualify because the loan agreement itself doesn't specify that it can only be used for educational purposes. That said, do the math carefully. If the interest rate difference is significant enough, you might still come out ahead with the personal loan even without the tax deduction. The student loan interest deduction is limited to $2,500 per year and phases out with higher incomes.

My sister was in this exact situation last year! She ended up going with the personal loan because the interest rate was WAY better than the private student loan offers. When tax time came, she couldn't deduct the interest BUT still saved more money overall because of the lower rate. Just be super clear with your credit union about what you're using it for, and keep all your receipts showing it went to tuition in case of an audit.

If you're struggling with covering the remaining balance, have you considered appealing your financial aid package? Many students don't realize you can submit a special circumstances appeal if your financial situation has changed since you submitted your FAFSA. I'd start by calling the Federal Student Aid Information Center to discuss your options (1-800-433-3243), but it can take forever to get through. I recently discovered a service called Claimyr (claimyr.com) that helped me get through to an actual FSA agent in under 5 minutes instead of waiting for hours. They have a video demo showing how it works: https://youtu.be/TbC8dZQWYNQ The agent I spoke with helped me understand how to properly file an appeal based on my changed income situation, and I ended up getting an additional $4,500 in aid. Might be worth looking into before taking out any loan.

WAIT - before you do anything else, check if your school has emergency grants available! My university had special COVID relief funds that carried over, and then they also have donor-funded emergency grants for students with sudden financial gaps. I was in almost this exact situation last year (needed about $5000 more) and was able to get $3500 in emergency grant money that I DIDN'T HAVE TO PAY BACK. Also, definitely try appealing your financial aid as someone else suggested. My friend's SAI (Student Aid Index) was recalculated after her mom lost her job, and she got a significant increase in her aid package. Personal loans are better than credit cards, but exhaust all your free money options first!!

Noticed nobody mentioned another option - if your parents have good credit, a Parent PLUS loan might be a better choice than either private student loans OR personal loans. The current fixed rate is 8.05% which isn't great but it's still better than most private loans, AND the interest IS tax-deductible because it's an official federal student loan. Just another option to consider!