Parent Plus Loan

[dawndhartley37]

We took a parent plus loan out for my son back in 2020 to help cover college expenses that were not covered by scholarships, grants or financial aide. In 2021, the University said that they were going to remote learning due to the pandemic. Towards the end of 2021, my son was refunded back to his student account for room and board and meals because he was not living on campus. Since we had taken out the parent plus loan, he gave us 4, 884 dollars of that money to pay off the parent plus loan. However, he believes that he has to count the money as income that was refunded into his student account for room and board and meals on his tax return? Is this true? There was no other way for the school to transfer the money to Great Lakes who was student loan service provider. They said we would have to pay that loan off separately. The school does not take care of that. Is there anything we can do if he is having to count that as income?

Thank you!

Signed concerned parent

[Hal_Al]

He does count that as income.  It was not money that was given to you/him.  It was only borrowed money. Whether it paid for room & board or went into your bank account, you still have to pay it back.

If it was scholarship money that was refunded, the answer might be a little different, but probably not.  Scholarships that pay for tuition, fees and books is tax free.  But, scholarships that pay for room and board (R&B)are taxable income to the student. So, R&B scholarships are taxable whether refunded or not. 

[dawndhartley37]

Hi! Thank you for your response. How is that make any sense? First of all he didn't ask to stay home from school. That money would never have been refunded to him if it were not for the pandemic. That money would have stayed at the University and we would have paid the loan like we planned in monthly payments. Because he was refunded money from financial aide for room and board and meals, that was only because he was made to stay at home. Why shouldn't we have to count it as our income since the loan was in our name? The loan was not in his name. Also, scholarships and grants I thought only went to paying tuition and lab fees. I think the money that was refunded to him was out of financial aide. Also, there was no way for the money to go directly to the service loan provider for the Parent Plus Loan from the University so there was no choice but to refund the money back to his student account.So again is this still counted as income on his taxes?

[dawndhartley37]

Also, I think there is a misunderstanding here. The money he got back we used to pay back a student loan. The money refunded to my son through is student account was not a scholarships of any kind. That scholarships and grants that he got was still used for his tuition. He did not get that money refunded back because he was still in school.