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Savings-Bonds-Alert: Student Loans and Education Deduction

Wednesday, August 04, 2004

Student Loans and Education Deduction

I purchased Series EE US Saving Bonds for my daughter's education, however, she used student loans to finance her college expenses. This loan has to be paid off in 10 years. My daughter is 29 years old now and has already graduated from the university and is working. Can she redeem these EE US Saving Bonds now and pay off part of her student loans? If so, how that should be done and could she avoid paying taxes on redeemed bonds? Tom's response Unfortunately, the Savings Bonds education deduction isn't available for paying off student loans. You can certainly cash the bonds to pay off the loans, but you won't get the income tax deduction. If your daughter has recently consolidated her student loans, she may be paying a lower rate than the bonds are earning. In this case, it can be better to keep the bonds. Click here to visit the premier independent web site for U.S. Savings Bond owners.


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