Paying your grandchild’s student loan does not entitle you to claim the student loan interest deduction on your own tax return. Under Internal Revenue Code §221, the deduction is allowed only to the individual who is legally obligated to repay the loan.
When you make a payment on your grandchild’s behalf, the IRS treats the transaction as a gift to the grandchild, who is then considered to have paid the interest themselves. As a result, your grandchild—not you—may claim the student loan interest deduction, provided they meet all eligibility requirements.
To qualify, the grandchild must:
- Be legally liable for the loan
- Not be claimed as a dependent on another taxpayer’s return
- Have modified adjusted gross income (MAGI) within the applicable phase-out limits
- Have paid interest on a qualified student loan
The deductible amount is reported on Schedule 1 (Form 1040), Part II, Line 21 (“Student loan interest deduction”) and is generally supported by Form 1098-E, which is issued in the borrower’s name.
It is important to note that these payments do not qualify as charitable contributions. Payments toward an individual’s student loan are treated as personal gifts, not donations to a qualified organization under Internal Revenue Code §170, and therefore are not deductible by the payer.
Additionally, if the total amount you pay on your grandchild’s behalf exceeds the annual gift tax exclusion, you may be required to file Form 709 (United States Gift and Generation-Skipping Transfer Tax Return).
Source:
Form 1098-E, Student Loan Interest Statement (2025)
Disclaimer: Always verify with current IRS forms and instructions or consult a tax professional for personalized advice. The information provided is general and may not apply to your specific situation.