Yes, tuition paid with loan money (but not scholarships) counts
toward the tuition credits. This is because loans eventually have to be paid
back, so it really is YOUR money that paid the tuition.
But, you do not get a “refund” of what you paid. The amounts
you paid are used to calculate an education credit. The maximum credit is $2500,
of which only $1000 is refundable. That is, the other (up to) $1500 can only reduce your calculated tax.
